The Chicago developer that admitted to embezzling $160 million from nearly
300 Chinese investors was sentenced to a three-year prison term for what
Securities and Exchange Commission (SEC) prosecutors claimed is the biggest
EB-5 visa program fraud committed to date.
Anshoo Sethi negotiated a plea deal for one count of wire fraud in January
2016, revealing he misrepresented key financial information to the Chinese
businessmen who assumed they would receive temporary EB-5 U.S. visas for
their investments in a supposed hotel construction project. The EB-5 program
issues green cards to overseas investors who invest in qualified U.S.-based
The hotel development plan, however, never underwent the requisite city
permit approval process, and the documentation Sethi presented to the
financiers to persuade them to invest was forged.
John Z. Lee, the presiding judge in the U.S. District Court for the Northern
District of Illinois, stated at the sentencing proceedings that he believed
Sethi when he claimed he indeed intended to complete the hotel. However,
this belief, according to Justice Lee, was not sufficient to outweigh
the extent of Sethi’s fraudulent activity that saw him mislead hundreds
of investors for his profit.
Sethi was required to pay almost $9 million in restitution, which was the
remaining unrecovered sum from the original $160 million he defrauded
from the Chinese lenders. A significant majority of that capital was deposited
into an escrow account that the SEC subsequently froze in 2013.
In 2014, Sethi was indicted for eight counts of wire fraud and two counts
of making false statements for the EB-5 fraud. The defense counsel claimed
Sethi was a youthful, inexperienced and aspiring entrepreneur who was
exploited by a large consortium of lawyers and financial advisors who
scam the EB-5 program for personal gain.
Sethi used his family’s land located in the vicinity of O’Hare
International Airport to submit an application in 2010 to the U.S. Citizen
and Immigration Services (USCIS) to be considered for EB-5 regional center
status—a designation that would enable him to negotiate foreign
investments in exchange for visas. After he had been approved, Sethi marketed
his hotel development plan to numerous Chinese backers, claiming the proposed
construction had obtained financing from the Chicago city government and
had agreed to partnerships with large industry companies, including Starwood
Hotels and Resorts Worldwide, Inc.
To entice the investors, Sethi showed them falsified documents he claimed
proved the alleged hotel chain agreements and a $97 million loan from
the Chicago City Council. He also stated the project site had been appraised
for over $177 million, although the land had never undergone a valuation
appraisal. Sethi’s misrepresentations led to 290 investors contributing
approximately $541,500 each. Sethi diverted most of the money to an escrow
account, where it remained until 2013 when the SEC, acting on a judicial
order, froze the account.
Unfortunately, nearly $11 million that Sethi garnered via administrative
costs was lost, spent by Sethi to perpetuate the scheme according to prosecutors.
The majority of that sum went to brokers who managed Sethi’s relationships
with the Chinese financiers.
Although Sethi appeared to have a genuine intent to finish the project,
as evidenced by his own family’s $10 million in contributions to
the plan, the scope of his fraud was too substantial for the judge to
grant his counsel’s request for a modest three-month prison sentence.
Melissa Lucar directly for more information.