SEC: Three Developers Settle Charges of Fraudulent EB-5 Offering
The Securities and Exchange Commission today announced that three Houston-area developers have agreed to settle charges that they misused investor funds raised from 90 Chinese investors under the EB-5 Immigrant Investor Program on unrelated projects.
The three developers – America Modern Green Senior (Houston) LLC, America Modern Green Community (Houston) LLC, and America Modern Green Residential (Houston) LLC – have repaid the $49.5 million that they raised from the Chinese investors.
According to the SEC’s order, the developers told investors that their funds would be used exclusively for a large mixed-use real estate development EB-5 project. Instead, the SEC found that the developers improperly transferred $20.5 million of investor funds for various undisclosed and improper purposes, including funding purchases with respect to two unrelated real estate projects. In addition, the SEC found that the developers’ offering materials improperly described the titles and roles of two real estate experts.
“These developers obtained almost $50 million from investors in connection with an EB-5 offering that was based on misleading statements and involved a misuse of the funds raised,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Today’s resolution provides full relief to all of the affected investors.”
The order finds that the developers violated the antifraud provisions of Section 17(a)(2) and Section 17(a)(3) of the Securities Act of 1933. Without admitting or denying the SEC’s findings, the developers collectively agreed to pay disgorgement of $49.5 million plus $1,144,135 in interest, and an $800,000 penalty. The order deems the disgorgement satisfied by payments to the Chinese investors made by the developers before the settlement, and also provides that the interest will be distributed to the investors. The order also imposes a cease-and-desist order on the developers.
The SEC’s investigation was conducted by Sarah S. Mallett and supervised by Eric R. Werner and James E. Etri of the Fort Worth Regional Office. The SEC appreciates the assistance of U.S. Citizenship and Immigration Services.