Realtors Are Doing the EB-5 Dirty Work for South Florida Projects

Here we go again:  the EB-5 scam du jour has reared its ugly head in South Florida.  Never mind that direct marketing of an EB-5 investment is illegal in the U.S.  Now we are getting to see the same scams which used to be reserved for prospects on foreign shores.

It smelled funny from the get-go: direct text and email solitications from local South Florida realtors who didn’t know me, offering me and my “EB-5 investor clients” the opportunity to “finance” an EB-5 investment.  The law is settled on the fact that an EB-5 investor’s funds must be 100% “at risk”;  developer can’t “finance” the investment for an EB-5 investor.  Period.

Going online to look at the EB-5 projects advertised, I expected to see another swarm of bandits.  Instead, I was surprised to see that the projects in question appeared totally fine and had been organized by well-respected EB-5 firms.  Nothing on their sites or materials even hinted of this “unique EB-5 financing opportunity” the realtors are promoting very aggressively via spam texting, spam email and even Linked-In.  Why?

Plausible deniability, that’s why.  Remember when the Kushner Companies basically said ‘hey, we can’t control what a Chinese agent tells a prospective investor…’?  Well, this one is even better:  this is simply “Hey, we just sell the EB-5 investment, we don’t finance it, that’s between the investor and whoever he wants to work with…”

Except it isn’t.  It is just another totally illegal way to circumvent settled EB-5 law regarding funds at risk and to fraudulently induce – my catchphrase of the summer it seems – investors to falsely believe that they can put a “down payment” of $100,000 or whatever and have the balance of their $500,000 investment “financed” by a third party, whose contractual dealings and relationship with both the EB-5 project AND the investor magically fail to appear when the I-526 is filed.

The sheer STUPIDITY of the people who orchestrate these scams is perhaps the most startling part of it.  The notion that a large EB-5 project can conspire with real estate agents and questionable lending sources, advertise it extensively, and get away with it is absurd in todays adjudication environment.  USCIS has become VERY adept at scrutinizing EB-5 cases and the notion that clandestine financial arrangements can be kept some sort of ‘insider secret’ over the years from I-526 filing until I-829 filing is ludicrous. So the migration agent/realtor/mortgage broker/etc. gets their upfront commission via the clandestine deal after they convince the misinformed investor that either 1) the secret secured financing deal really IS legal or 2) what the USCIS doesn’t know can’t come back to bite them.   

Of course, at the end of the day, it will end the same:  the investors will get US residency denied either at the I-526 level (if the USCIS discovers the concealed deal early on) or at the I-829 level, when dozens of investors will be facing the same termination and loss of their “down payment” after it all blows up.  

Trust me, folks: it ALWAYS blows up.