Alleged Immigration Scams Lead to SEC Fraud Charges

The Securities and Exchange Commission has filed enforcement actions against a number of attorneys for offering EB-5 investments even though they are not registered brokers. As SEC Enforcement Division Director Andrew J. Ceresney noted, individuals who conduct certain services and get commissions when raising funds for EB-5 projects have to be officially registered.

Under the EB-5 Immigrant Investor Program, foreign investors are given an opportunity to gain U.S. residency if they invest in a designated projected that preserves or establishes at least 10 jobs for workers in this country. In its complaint, the SEC accused Hui Feng and his firm, the Law Offices of Feng & Associates of acting as unregistered brokers when selling EB-5 investments to over 100 investors. The Commission said that they bilked clients by not disclosing that they were paid commissions on the investments, which is a breach of their legal and fiduciary obligations. The regulator also said that they bilked certain entities that do offer such investments. Feng and his law offices are based in New York.

The SEC also filed charges against Mehorn P. Azarmehr and his Azarmehr Law Group, Michael Bander and his Bander Law Firm, Miami, Fla. lawyer Roger Bernstein, Hoboken, NH lawyer Allen Kaye, Los Angeles-based lawyers Taraneh Khorrami, Mike Manesh and this firm Manesh and Mizrahi, and Kefei Wang, who is based on China. All of these individuals and entities have agreed to cease and desist from acting as unregistered brokers. Most of them have consented to pay disgorgement, prejudgment interest, and/or a penalty.

The broker registration violations they were charged with included getting different EB-5 regional centers or their managers to pay them commissions for every new investor to whom they sold limited partnership interests. Such payments were separate from legal fees they received for providing legal services to these same clients.

The firms and lawyers are also accused of taking part in activities to make the transactions at issue happen, including recommending EB-5 investments, serving as liaison between an investor and a regional center, or facilitating the documentation or transfer of investments funds to the center. The SEC said such actions violate The Securities Exchange Act of 1934.

Also in trouble with the SEC over an alleged immigration scheme is Lin Zhong, also known as Lily Zhong, and her EB5 Asset Manager LLC, which is based in South Florida. Zhong and her company purportedly raised at least $8.5M for U.S. EB-5 Investments LLC to use to in real estate development projects that were supposed to create jobs. Instead, they allegedly used almost $1 million on personal luxury spending. They also are accused of misrepresenting to investors how their money was actually going to be used and did not disclose that a previous real estate venture that Zhong was involved had failed.

Zhong has consented to stipulate to the asset freeze that the SEC obtained through a court order. The SEC says that Zhong and EB5 Asset Manager violated the Securities Exchange Act of 1934 and the Securities Act of 1933’s antifraud provisions, as well as Rule 10b-5.

The SSEK Partners Group is an institutional investor fraud law firm.

Assets Frozen in Alleged Immigration Scam, SEC, November 19, 2015

Investor Alert: Investment Scams Exploit Immigrant Investor Program, Investor.gov

SEC: Lawyers Offered EB-5 Investments as Unregistered Brokers, SEC, December 7, 2015