EB-5 fraud; SEC announces investigation

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EB-5 fraud; SEC announces investigation

In an important development, the SEC and USCIS are currently investigating the operations of a Chicago-based EB-5 investment center called the Intercontinental Regional Center Trust of Chicago (IRCTC) and its promoter, Mr. Anshoo Sethi, in connection with the promotion of its offering for the “Chicago Convention Center LLC” investment. The investment promised to build the world’s first zero carbon emission platinum LEED certified hotel and conference center near O’Hare Airport in Chicago.

The Complaint filed by the SEC alleges that Mr. Sethi and his associates fabricated agreements with hotels. The project sold more than $145 million in securities through limited partnership interests to EB-5 investors. The project was particularly heavily marketed in China, and more than 90% of the estimated $11 million in administrative fees collected from investors are estimated to have been spent. It is alleged that Mr. Sethi himself transferred $2.5 million to his personal bank account in Hong Kong.

The claims and documents provided by the IRCTC and Mr. Sethi, in hindsight, contain several obvious discrepancies. Mr. Sethi, at the age of 29, claims to have 15 years of experience in real estate management and development. The agreements between the project and many hotels such as Starwood, the Hyatt, and the Intercontinental Hotel Group were all forged.

A complaint has been filed in the federal district court for the Northern District of Illinois: http://www.sec.gov/litigation/complaints/2013/comp-pr2013-20.pdf

This unfortunate situation once again highlights the importance of conducting due diligence and retaining qualified immigration counsel for an EB-5 investment, even where such investments are to be made in regional centers.