SEC Charges Florida Regional Center Stole $43.9 Million from EB-5 Investors

  

Here we go again: in a complaint filed in the United States District Court of the Southern District of Florida, the SEC has charged Robert Walsh, his Palm House Hotel LLP,  and the South Atlantic Regional Center with misappropriating a significant portion of the $43.9 million of EB-5 investor funds. The lawsuit also alleges the defendants made false and materially misleading statements to the investors.

It is a story repeated so often that it hardly raises an eyebrow in the U.S.  The reality is that the EB-5 industry is so corrupted with fraud and misrepresentation that the bad news eclipses all the true EB-5 success stories.  When I first formed American Venture Solutions Regional Center in 2010, I felt very proud of what we were doing.  These days, in the U.S., telling someone you own a Regional Center elicits about the same response as if you had told them you owned a strip club.  "Sullied" is what our industry has become through the continuing lies, false promises, and outright fraud of too many of our EB-5 Regional Centers, their projects, and their hooligan foreign migration agents.  But no matter how frequently this is happening, my reaction is always the same:  what about those families, their dreams, their futures?  By choosing yet another horrible EB-5 deal, "at least 88 [EB-5] investors" family plans for a new life in America have be vanished along with their money, according to the Real Deal article.

This business is a tough one.  Raising EB-5 funds while complying with 100% of U.S. laws is not for the weak-willed.  It means:

  • NOT promising false timelines, returns, or expectations
  • NOT paying foreign immigration agent kickbacks (the SEC settled with a $1M fine in its prosecution fo payments by Regional Centers to anyone who is not a registered securities broker or dealer, but virtually 100% of the industry continues to do so.)
  • NOT abandoning the interests of the EB-5 investor after the check clears.

To be fair, there ARE, rarely, EB-5 disasters which truly are not the fault of the developer or the Regional Center.  Things simply don't always worked out.  For example, several years ago another Regional Center in Florida project collapsed when they took too long to raise EB-5 funds and bank financing was withdrawn; it was a terrible waste of time for investors, who had to start from scratch, but at least they got their money back. 

That was NOT the case with Mr. Mathews.  According to the SEC, he used the investor's EB-5 funds for a house in Connecticut and to save his mansion in Palm Beach, Florida, from foreclosure.  The worst part: he actually bought a "151-foot mega yacht" with the money entrusted to him by his EB-5 investors.  Can you imagine?

Be careful out there, folks.

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