A group of investors claims that a Florida real estate developer abused the EB-5 investor program and bilked them out of millions in a lawsuit filed on Oct. 11 in Palm Beach County. The 90 Chinese plaintiffs are hoping to recover some of their $99.5 million investment in a Jupiter mixed-use real estate development. EB-5 visa holders are promised expedited green card processing when they invest between $500,000 and $1 million in qualified projects. However, their investment does not guarantee that their applications will be successful.
The lawsuit claims that the developer went beyond the scope of the offering documents to take out a series of loans and lines of credit that he then intentionally defaulted on. The developer is also alleged to have converted the Chinese investment from secured debt to unsecured equity. The plaintiffs say that the ultimate goal of these actions was to wipe them out and leave them with nothing. The lawsuit suggests that the developer was able to accomplish his goals because he exerted almost complete control over the project and even influenced decisions made at the EB-5 regional center.
The plaintiffs want their case to be argued before a jury. They have also asked the judge hearing the case to appoint a corporate monitor or receiver to take financial control of the project. The developer is accused of violating EB-5 program rules laid down by U.S. Citizenship and Immigration Services and project guidelines established by the U.S. Securities and Exchange Commission.
Commercial real estate developers must meet the requirements of local, state and federal laws and regulations while complying with the terms and conditions of lenders and investors. Attorneys with contruction law experience may be able to help developers, suppliers and contractors avoid legal issues or mitigate their consequences by checking offering and loan documents thoroughly and pursuing swift resolutions when problems do arise.
Source: Construction Dive, EB-5 investors sue Florida developer for alleged $99.5M fraud, Kim Slowey, Oct. 15, 2018