SEC: Assets Frozen in Alleged Immigration Scam

(Source:SEC, Washington D.C., Nov. 19, 2015) The Securities and Exchange Commission today announced it has obtained a court order freezing the assets of a South Florida woman and her company accused of purchasing a boat and luxury cars with money she raised from investors seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program.

Under the EB-5 program, foreign citizens may qualify for U.S. residency if they make a qualified investment of at least $500,000 in a specified project that creates or preserves at least 10 jobs for U.S. workers.  The SEC alleges that Lin Zhong and her company EB5 Asset Manager LLC raised at least $8.5 million for use by U.S. EB-5 Investments LLC in job-creating real estate development projects, but they diverted nearly $1 million to purchase a boat, a BMW, and a Mercedes among other improper personal uses of investor funds.

“We allege that Zhong promised investors their money would be used to develop real estate projects, but she misused their funds to enrich herself while making material misrepresentations and omissions to investors,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.

The SEC also obtained a court order appointing a receiver to administer and manage the business affairs and assets of the company and its subsidiaries for the protection of investors. According to the SEC’s complaint filed earlier this month in U.S. District Court for the Southern District of Florida against Lin Zhong, who also goes by the name Lily Zhong:

• Investors were told that money they invested in U.S. EB-5 Investments LLC would be used for real estate development including a mixed-use commercial project planned for the City Center in Port St. Lucie, Fla. 
• Zhong and EB5 Asset Manager diverted approximately $900,000 of those funds for unrelated personal uses that also included her own real estate taxes as well as education expenses for her family members.
• Zhong and EB5 Asset Manager also made misrepresentations to investors about the use of U.S. EB-5 Investments’ funds and failed to disclose Zhong’s past failed real estate venture.
• Investors were falsely told that U.S. EB-5 Investments would prepare and provide unaudited financial reports to investors.
• Zhong and EB5 Asset Manager falsely claimed that certain investors’ funds would be held in escrow until the form filed by potential EB-5 investors to petition the U.S. Citizenship and Immigration Services (USCIS) for immigration status received that agency’s approval.
• Zhong and EB5 Asset Manager also made material omissions and false statements about conflicts of interest, and made false statements about the location of real estate development projects.

The SEC’s complaint alleges that Zhong and EB5 Asset Manager violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  Zhong has agreed to stipulate to the asset freeze and receiver following a lengthy hearing on the SEC’s motions when the court issued a separate order granting expedited discovery, prohibiting the destruction of documents, and requiring Zhong, EB5 Asset Manager, and relief defendants to provide the SEC and the court with a sworn accounting of their assets.

The SEC’s continuing investigation is being conducted by Shelly-Ann A. Springer-Charles and Margaret Vizzi in the Miami office, and the case is being supervised by Eric R. Busto.  The SEC’s litigation will be led by Alejandro Soto.  The SEC appreciates the assistance of the USCIS.