Beware of EB-5 Fraud

By Becky Clapes, Guest Blogger

The EB-5 program allows non-citizens to invest $1 million in a commercial enterprise that creates a minimum of 10 new full-time jobs within two years or saves 10 pre-existing jobs that were at risk in a troubled business. Once the two years has passed, the investor may then apply to become a legal permanent resident and then eventually, apply for citizenship.

While the EB-5 program has created many new businesses and the revival of troubled businesses, it has also been stricken with scam artists. The most common types of scams involve scam artists preying on investors to put their money into illegitimate businesses or fake regional centers.

Here are several different ways foreign investors can protect them against EB-5 fraud.

  1. Do your research. Make sure you know the ins and outs of the company in which you are choosing to invest in as well as the people involved in the company.
  2. Monitor the use of your invested funds. Be sure the way in which your funds are being used meet the EB-5 requirements.
  3. Always get the investment in writing. Do not agree to verbal contracts or agreements when distributing funds for your investment.
  4. Know how the developers are paid. Some developers do not have a personal financial investment in the opportunity, and therefore do not care about its outcome.
  5. Look for warning signs. Look for whether or not the investment promoter offers you protection on the investment or not. These promoters should not ever be offering permanent residency. Promoters should never be offering guaranteed returns on investment.

For more information about EB-5 and EB-5 fraud and for recent examples of EB-5 fraud, see here.