Some EB-5 offerings were built on numbers alleged to be false from the start: a land value, a collateral promise, a job count, or a claim about how much money the project had already raised. In a 2018 federal decision in Massachusetts (584 B.R. 427), the court explained that under Massachusetts law fraud requires, among other things, “a knowingly false statement concerning a material matter.” In two of the cases below, investors still lost because they waited too long.
This post is part of a series on legal options when an EB-5 investment goes wrong.
Federal law describes the EB-5 investment as one in a “new commercial enterprise (including a limited partnership)” (8 U.S.C. § 1153(b)(5)), which this post calls the NCE. In the senior-care campus case discussed below, that fund was an LLC created by a regional center, which USCIS describes as “an economic unit, public or private, in the United States, involved with promoting economic growth.” Under the same statute’s regional center program, investors pool their money through a regional center that the Secretary of Homeland Security has designated (§ 1153(b)(5)(E)), and the business that receives the money and is “responsible for creating jobs” is the job-creating entity, or JCE (§ 1153(b)(5)(D)(v)). In the cases below, the private placement memorandum (PPM), business plan or sales materials described the project with numbers.
What happened when an investor alleged the land was worth far less than promised?
An unpublished 2025 California Court of Appeal decision (No. B338133) involved a planned senior-care campus in Southern California, with a total cost of $83 million, partly funded by a $42 million loan from an EB-5 fund. According to the investor’s complaint, the regional center’s owner and an attorney held seminars in China in 2015 and 2016 where they told investors that the fund owned the project land, that the land was worth about $22 million, and that the investment carried “minimal risk” because the land could be sold if the project failed.
The investor paid $500,000 in August 2016. According to his complaint, in July 2017 the regional center emailed investors that the project was delayed and that it hoped to have construction permits by the end of 2018, and construction had not begun by March 2020. He alleged that in 2022 USCIS denied his visa application in a letter stating that the project’s business plans “are not credible.” After more investigation, he alleged, he learned the land was worth only $660,000, not the $22 million that had been represented, and that the defendants did not own it when he invested. They bought it in 2017, according to the complaint.
He lost anyway. The defendants demurred, he did not oppose, and the trial court dismissed every claim against the regional center, its EB-5 fund and its owner as filed too late. The claims against the attorney and the other defendants were not part of the appeal, and the opinion does not say how they ended. The Court of Appeal affirmed, holding that “a reasonably prudent investor, having invested half a million dollars in a project, would be suspicious and, at the very least, inquire as to the reasons for an almost-two-year delay.” The court accepted his allegations as true and did not decide what the land was worth.
What if the collateral and job numbers were wrong?
A published 2024 Court of Appeals of Virginia decision (Record No. 0523-23-4) involved an electric-car venture funded largely by EB-5 investors. According to the opinion, marketing materials told investors their loans were “overcollateralized” and that they held a “first-ranking mortgage” on land and equipment worth more than the loan. The opinion says the defendant “conceded that this was a false statement because the loan was not ‘overcollateralized.’”
A brochure also claimed the project had “the highest employment magnification factor (17.45),” a multiplier used to count indirect jobs toward each investor’s ten-job requirement. The court noted that the defendant “was not aware that the USCIS had ever approved such an employment magnification factor.” Meanwhile the PPM disclosed only 71 full-time employees for 99 investors.
Even so, the court held that the PPM’s warnings, including that the loan might not be fully secured, put the investors on notice when they signed it in 2012 and 2013, so their 2019 lawsuit was too late, and it affirmed the ruling for the defendant. The Supreme Court of Virginia refused the investors’ appeal.
How has the SEC handled alleged false leases, job counts and financing claims?
In an SEC case in the Central District of California (No. 2:17-cv-06929), filed in 2017, the SEC alleged that a couple raised more than $22.5 million from 45 investors in China for two projects, one of them an interior design center in Ontario, California. The SEC alleged they misappropriated more than $12 million. It also alleged they “provided investors a fake lease for the interior design center that changed the name of the real lessor to a [defendant]-controlled entity and overstated the true size of the leased space five-fold.” According to the SEC, “the purported center is an undecorated, half-empty warehouse space with one apparent employee while reports submitted to USCIS represented that the project is fully functional and has generated 345 jobs.”
The defendants settled without admitting or denying the allegations. The final judgments, entered in November 2018, ordered disgorgement of $24,655,000 plus $1,173,098 in prejudgment interest, subject to an offset for amounts the court-appointed receiver distributes to investors, and civil penalties of $1,077,500 against each of the two individual defendants.
The SEC alleged in 2021 that a New York real estate developer and his regional center raised more than $229 million from more than 450 investors for two Queens projects, and that the offering materials “made material misrepresentations regarding the sources of financing for the projects,” among other things. The defendants consented to a final judgment requiring payment of $272,140,380. In a March 2026 order (E.D.N.Y. No. 1:21-cv-05350), the court granted the SEC’s motion to enforce the judgment in part and denied it in part, noted that only $42.5 million had been paid, and found a liquidation receiver warranted for the two Queens projects. Repeating an earlier finding, it said “the value of expert reports purportedly showing that the Projects are worth substantially more than what is owed under the Final Judgment is ‘almost nil.’” The court appointed a liquidation receiver in July 2026, and the developer and the regional center had appealed that appointment as of October 2026.
In both cases, the SEC also alleged that investor money was misappropriated, a problem the post on EB-5 misappropriation covers.
What if the business plan overstated the money already raised?
In the Massachusetts case (584 B.R. 427, D. Mass. No. 1:16-cv-12581), a direct EB-5 investor put $1 million into a planned bar and restaurant in Malden, Massachusetts. He alleged he was told the project already had $5 million in funding, and that the founders had in fact put in about $470,340 and only one $500,000 EB-5 investment had arrived. The complaint alleged that the co-manager who ran the business day to day admitted to “falsely inflating” those purported investments.
In 2018 the court let the fraud claim proceed and dismissed the federal and state securities claims. In its 2019 summary-judgment ruling, it granted judgment to the co-manager and the other manager on every remaining claim against them, leaving a single fraud claim against the person who allegedly made the $5 million statement. It rejected claims based on the business plan’s projections, because the investor did not see the plan until after he invested. According to the docket, the court referred the case to alternative dispute resolution in December 2019, and the parties filed a stipulation of dismissal in January 2021, with no trial and no judgment on the remaining fraud claim. The terms of the dismissal are not in the public record reviewed for this post.
The post on due-diligence failures covers a 2026 North Carolina ruling that let a similar claim go forward, based on allegations that investors were falsely told the developer had contributed $8 million. As of the court’s June 2026 ruling, that case was at the pleading stage, and the court had made no findings of wrongdoing.
How have courts and the statute treated valuation and job numbers?
In the New York SEC case, the court gave the developer’s expert valuation reports almost no weight, and it found that the developer’s newer claim that the properties were worth more than $600 million rested on “self-serving and unsupported affirmations.” In the Virginia case, the record included the defendant’s own testimony conceding that the collateral claim was false.
The current statute also addresses job numbers. For each offering, a regional center must file “a credible economic analysis regarding estimated job creation that is based upon economically and statistically valid and transparent methodologies” (§ 1153(b)(5)(F)(i)(II)).
What warning signs can you check in your own documents?
Start with land value and ownership. In the senior-care campus case, the investor alleged the land was worth $660,000, not $22 million, and was bought after he invested.
Compare the marketing to the PPM. Sales materials in the Virginia case promised over-collateralized loans, while the PPM warned the loan might not be fully secured. The Virginia court found that the PPM put the investors on notice when they signed it, which started the clock on their claims.
Check the jobs, leases and money raised. In the Virginia case, the PPM showed 71 full-time employees for 99 investors. In the SEC’s California case, the SEC alleged a fake lease and a report of 345 jobs at a half-empty warehouse.
Frequently asked questions
Is an overvalued project automatically fraud?
In the Massachusetts case, the court said “optimistic predictions of future potential” are not actionable, while a claim based on an alleged false statement about money already raised survived summary judgment.
What did investors in the SEC’s California case get back?
The final judgments ordered disgorgement subject to an offset for amounts the court-appointed receiver distributes to investors. The 2018 SEC release does not say how much investors received. In January 2023, the court recorded that the defendants had satisfied the amounts due under the judgments, including disgorgement and penalties.
My project is delayed but the regional center says it is on track. Should I wait?
In the senior-care campus case, the court held those assurances did not excuse the investor’s failure to investigate an almost two-year delay.
What to do now
- Gather your offering documents: the PPM, business plan, subscription agreement, limited partnership agreement, and any translations.
- Save brochures, seminar slides and messages from your migration agent or the regional center.
- Write down what you were told about those numbers and who told you.
- Keep annual statements, fund-administrator reports, project updates and any USCIS notices about the project.
- Talk to your immigration counsel about I-526 and I-829 effects before taking action.
- Consult a securities lawyer promptly. In the senior-care campus and Virginia cases, the claims failed on timing.
Rosenberger + Kawabata does not give immigration advice. Before taking legal action, talk with your immigration attorney about how a lawsuit or a recovery could affect a pending I-526 or I-829 petition.
Rosenberger + Kawabata represents investors in securities fraud and investment loss cases, including claims by EB-5 investors against regional centers, developers and the professionals around them. Consultations are confidential.
Call Rosenberger + Kawabata at (310) 894-6921.
This post is attorney advertising. It is general information, not legal advice, and reading it does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.