The Securities and Exchange Commission (SEC) announced today that they were filing fraud charges against a Texas based couple for allegedly stealing funds from investors based in foreign countries, while promising these investors a path to citizenship in the United States of America (US) through the EB-5 visa program.
In a joint release with U.S. Citizenship and Immigration Services (USCIS), the SEC gave a joint statement giving details about the EB-5 program with the intention of preventing investors from become likely targets.
According to the statement The EB-5 program provides certain foreign investors, who can demonstrate that their investments are creating jobs in this country, with a potential avenue to lawful permanent residency in the United States. Business owners apply to USCIS to be designated as “regional centers” for the EB-5 program. These regional centers offer investment opportunities in “new commercial enterprises” that may involve securities offerings. Through EB-5, a foreign investor who invests a certain amount of money that is placed at risk, and creates or preserves a minimum number of jobs in the United States, is eligible to apply for conditional lawful permanent residency.
The complaint filed in the US District Court for the Southern District of Texas alleges that Marco and Bebe Ramirez, a married couple, targeted internationally based investors for investment in their three companies. The investors were promised that the investments would be invested as part of an EB-5 Immigration Pilot Program. However the money, once deposited with USA Now LLC, USA Now Energy Capital Group LP, and Now Co Loan Services, never actually invested the money in any such program. Rather large sums of the money was diverted to the Ramirez’s personal expenses and to other, undisclosed entities. There is at least one case of a Ponzi like situation where the Ramirez family paid off a previous investor using the funds from new investment.
“Through their investment scheme, the Ramirezes abused a program intended to attract foreign capital to create U.S. jobs. The Ramirezes misappropriated investor funds for their own purposes without any regard for the harm they caused investors who were seeking an avenue to U.S. residency.” said David R. Woodcock, Director of the SEC’s Fort Worth Regional Office.
In 2010 the Ramirez’s applied with the USCIS to be part of the EB-5 program, a decision had not yet been reached. However, the non-issue of the status did not stop the couple from soliciting investors with false promises about how their money would be invested. Other employees of USA Now LLC were also involved in the hoodwinking of investors. As part of the scheme, the SEC’s complaint alleges, the Ramirez family would tell investors that their investments would be held in an escrow account until they had received the USCIS decision. In truth the money was instantly diverted to other places, often the same day as the investor would place the funds into their account. Among the misappropriation was the starting of a Cajun themed restaurant, settling of an unrelated law suit, and purchasing of gifts for themselves and their employees. Initially targeting investors from Mexico, the Ramirezes and their companies soon expanded their scheme to include investors from Nigeria and Egypt as well and were able to raise over $5 million from gullible investors seeking a path to US citizenship.
“Even though investors provided the Ramirezes with at least $5 million, none of them have ever received conditional visas let alone green cards. Instead, the Ramirezes opened a restaurant and purchased other assets for themselves and their employees.” said David Peavler, Associate Director of the SEC’s Fort Worth Regional Office.
The SEC was successful in seeking the courts approval to freeze the assets and accounts of the Ramirezes and their three companies, effectively precluding them from raising any more money or spending the money already raised through the scheme. The SEC is charging Marco and Bebe Ramirez and their companies with violating, aiding and abetting in the violations of the antifraud provisions of the Securities Act of 19330.
Fraud can rear its head in almost any situation, and the EB-5 program is one of the most simplistic areas for cheats to take advantage of those seeking a better life in the United States. Investors in the United States have also been targeted in the past trying to bring their loved ones into the country. Any time a person invests there is always a chance that the person on the other end may be someone out to steal the investment for their own personal gain, which is why having the right vetting mechanisms, stringent due diligence, and keeping abreast of the current schemes being perpetrated are all good ideas.