SEC Charges Ski Resort CEO for Defrauding EB-5 Investors
On April 14, 2016, the U.S Securities and Exchange Commission froze assets of Jay Peak Inc, a ski resort project to attract EB-5 investments, and related businesses. The SEC asserts that Ariel Quiros and William Stenger, and their companies raised more than $350 million for investors under the assumption that the money was used to build a ski resort and biomedical research facility in Vermont. However, Quiros and Stegner used the investments to fund shortages in previous projects. In addition, $50 million were also used on personal expenses, such as buying a luxury condo, paying off taxes, and purchase of an unrelated ski resort.
According to the SEC, the misappropriation of funds was unknown to EB-5 investors and results in outright theft. Director of SEC’s Division of Enforcement, Andrew Ceresney, states “The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft… As alleged in our complaint, the defendants diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.” The SEC has charged Quiros, Stenger, Jay Peak, Q Resorts Inc, and seven limited partnerships and their general partner companies for violation of Securities Act of 1933 and Securities Exchange Act of 1934.
Over the past several years, we have seen various cases of EB-5 fraud. For example, in 2014, the SEC charged L.A based immigration lawyers for defrauding millions of dollars claiming that the money was used to construction an ethanol planted that had stopped in 2008. In additional, the FBI started to investigate a South Dakota Regional center following the bankruptcy of its Northern Beef Packer Project. The SEC has filed five EB-5 fraud cases in 2015, only one in 2014, and two in 2013. With several cases of defrauding EB-5 investors over the last few years, calls for improved federal and state level regulation and oversight on the EB-5 investor program has been increasing. Although the EB-5 program offers great benefits for both the investors and the United States, cases like this further highlight the inherent risk in the current EB-5 program.
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