A court order obtained by the Securities and Exchange Commission put a
freeze on the assets of a South Florida woman and her company for alleged
EB-5 fraud. Lin Zhong, the operator of EB5 Asset Manager LLC, is accused
of buying personal luxury items with money raised from investors looking
to obtain U.S. residency via the EB-5 Immigrant Investor Pilot Program.
The EB-5 program affords foreign citizens the opportunity to become eligible
for U.S. residency by making a minimal qualified investment of $500,000
toward a particular project that originates or sustains jobs for American
workers. The complaint filed by the SEC alleges that Zhong and her company
collected at least $8.5 million from investors to be used by EB-5 Investments
LLC for planned real estate projects; however, she purportedly siphoned
off $1 million to use towards the purchase of a Mercedes, a BMW, a boat
and other personal items.
The SEC’s complaint was filed in early November in U.S. District
Court for the Southern District of Florida. The list of claims made by
the SEC against Lin Zhong, who also goes by Lily Zhong, includes:
- Zhong and EB5 Asset Manager failed to provide information necessary to
disclose conflicts of interest, and created inaccurate reports about the
whereabouts of real estate development projects.
- Zhong and EB5 Asset Manager wrongfully claimed funds from specific investors
would be held in escrow until the prospective EB-5 investors’ petition
to the U.S. Citizenship and Immigration Services (USCIS) for immigration
standing received approval from the agency.
- Investors were incorrectly informed that U.S. EB-5 Investments would originate
and supply unaudited monetary documents to investors.
- Zhong and EB5 Asset Manager made fraudulent claims about how U.S. EB-5
Investments funds would be used, as well as omitting information related
to Zhong’s previous failures in real estate.
- Zhong and EB5 Asset Manager rerouted roughly $900,000 of investor funds
for unjustified personal use, such as paying her personal real estate
taxes and funding the education costs for family members.
- Investors were informed that funds they invested in U.S. EB-5 Investments
LLC would go toward real estate development projects that included a multi-use
commercial development planned for the City Center of Port St. Lucie, Fla.
To protect investors, a second court order obtained by the SEC put a receiver
in place to administer and oversee the company’s business activity
and assets, as well as its all of its subsidiaries.
According to the complaint, Zhong and EB5 Asset Manager LLC acted against
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,
according to the SEC’s complaint.
After a lengthy hearing on the SEC’s motions, Zhong agreed to have
her assets frozen when the court granted a separate order calling for
speedy discovery, disallowing documents to be ruined, and mandating Zhong,
EB5 Asset Manager LLC, and relief defendants to supply the SEC and the
court with a sworn detailed report of all assets.
The case will continue being investigated from the SEC’s Miami Office,
with assistance from the USCIS.