EB-5 Investors: Carefully Research Your Project!

There are few things in life as contemptuous as companies that take advantage of those that trust their money to them, yet throughout human history, we have seen countless creative and inventive ways to funnel large sums of money away from those with good intentions straight into the pocket of those without. EB-5 investments are no exception, and actually represent a fairly easy way to rip people off.

Avoiding A Fraudulent EB-5 Investment

The best way to avoid a scamming investment is to know the characteristics of a scam. We’ll point out a couple of signs and symptoms of an EB-5 scam, then give some helpful solutions for what to do if you suspect you’ve fallen victim to one, even if you aren’t in the United States.

Why EB-5?

There are so many types of investments in the United States, as well as the global economy as a whole, and fraud is found amongst nearly all of them – but is especially possible in EB-5. The unfortunate reality of the EB-5 program that makes it especially dangerous for uninformed investors is that investors are not U.S. natives, by nature, yet they have the relatively large sum of money that it takes to invest in EB-5. These two factors easily attract people of ill intent, looking to take advantage of people in another country with money, depriving them of their path to United States residency and citizenship as well as removing the job-creating funds that these entrepreneurs would have brought in. Of course, we find this behavior despicable above all else, but find it necessary to keep anyone researching EB-5 investment informed about the potential risks associated with less-reputable ventures.

The Ponzi Scheme

If you’ve never heard of a Ponzi scheme before, it is a term labelled to a relatively vague form of fraud in which returns or results are falsely represented by an individual or entity to convince more and more people to join, only to walk off or misuse the funds of those that enter later. EB-5 programs have a somewhat controversial name largely due to a couple of isolated incidents in which the funds used from a group of EB-5 investors were channeled into a Ponzi scheme, only to leave the initial investors high and dry. The most unfortunate thing about the Ponzi scheme is that investors don’t immediately realize they have been had, but have to wait all the way until results are supposed to begin funnelling their way in the form of a path to citizenship to find out that their investment is already long gone, and they are only worse off than when they started.

Bubble Bursting & Pyramid Schemes

Similar to the ponzi scheme, an economic bubble uses incoming funds from new investors to replace investments from initial investors, giving falsely positive results, only to eventually become outpaced by the eventual collapse of the bubble’s growth, leaving investors new and old without their initial investment, and the company that set it up already long gone. Pyramid schemes function very similarly to this, but rely on a constant, exponential flow of new investors to support those above them, inevitably unraveling when the flow of new investors cannot support the investment expectations of those above them. For EB-5 investments, this usually means that the company or venture invested in isn’t actually profitable at all, but only “growing” based upon continued investments.

Avoid Well-Intending Mishaps

Let’s be clear here, often the most dangerous EB-5 programs are those that mean well, but fail to deliver results to investors. Whether they overcommit a project or poorly plan the investment, if they don’t achieve the required criteria for the I-526 document that allows conditional residency, then the path to citizenship and residency ends there. Whether the company intended to or not, they have fraudulently represented their ability to deliver based upon your EB-5 investment. Even beyond the initial I-526 requirements, if the company isn’t clear about the investor’s role or actively engage them in business decisions (as is required for approval), then the investor can easily get rejected or heavily delayed on their path to citizenship. It is important that you work with an established, successful, and reputable project or company that can represent past project success in order to ensure that you’re not partnering with someone that may lead you astray.

Find A Return

In any other investment, a return on your investment is more than hoped for, but actually expected. You should have your sights set upon seeing an actual monetary return on your investment in addition to the citizenship or residency for you and your family, which means getting back as much or more than you invested. After all, the EB-5 program was not created to serve as a 500,000 dollar price tag on expedited citizenship, but actually serve to bring well-intending entrepreneurs to this country, which means expecting to invest in and create a profitable business for yourself and the local economy.

Contact American Venture Solutions

While we can’t promise you’ll see a return on your investment, we can offer an experienced team of honest and dedicated professionals that are excited to welcome entrepreneurs like yourself to this country and create American jobs in the process. We take your EB-5 investment very seriously, and always look to put the needs of our clients and their investments ahead of our own.

Tags: EB 5 Direct Investment, EB 5 Immigrant Investor Program, EB 5 Investor Program