EB-5 Due Diligence Failures: Can You Sue the Regional Center?

In Vermont, investors alleged that a state-run regional center promised to monitor and audit a ski resort’s EB-5 projects, then never issued the quarterly reports it described. At the pleading stage, the Vermont Supreme Court let their negligence and contract claims go forward. In other cases, the defendants pointed to the papers the investors had signed. In four cases discussed below (a Fourth Circuit case, a Charlotte hotel case, a Virginia case and a Wilmington marina case), the wording of the documents or the timing of the lawsuit decided all or part of the outcome.

This post is part of a series on legal options when an EB-5 investment goes wrong.

Who was supposed to check the project?

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 Fourth Circuit, Charlotte and Wilmington cases discussed below, the NCE was a limited partnership run by a general partner (GP) tied to the project’s sponsors. A regional center is, in the words of USCIS, “an economic unit, public or private, in the United States, involved with promoting economic growth.” Under federal law, investors pool their money through a regional center that the Secretary of Homeland Security has designated (§ 1153(b)(5)(E)). The same statute calls the business that receives the money and is “responsible for creating jobs” the job-creating entity, or JCE (§ 1153(b)(5)(D)(v)).

In the Wilmington case, the partnership agreement gave the GP exclusive management of the fund. Investors in the Fourth Circuit, Charlotte and Wilmington cases each brought breach-of-fiduciary-duty claims against the people who controlled their funds.

None of the decisions discussed here sets one standard for how much checking a regional center must do. In the Vermont case below, the duty came from what the regional center promised investors.

What claims can investors bring for poor due diligence?

Investors in the cases below brought claims for securities fraud under federal or state law, negligence, negligent misrepresentation, breach of contract and breach of fiduciary duty. In the Vermont case, the Vermont Supreme Court listed the first element of negligence as “a legal duty owed by the defendant to the plaintiff,” and at the pleading stage the court found that duty in the oversight the regional center promised.

In Vermont, a state agency ran the regional center, and according to the investors’ complaint its staff told prospective investors that the center conducted quarterly reviews and engaged in “financial monitoring and auditing of projects to ensure legitimacy.” The complaint also alleges that after a consultant raised fraud concerns in 2012, a center director made an “audit-visit,” reported “no issues” with the projects’ financials, and made no record of his findings.

A trial court dismissed the case. The Vermont Supreme Court reversed in part in 2019 VT 71A, and let the negligence, gross negligence and breach-of-contract claims go forward, holding that “plaintiffs have alleged sufficient facts to make out a special relationship between defendants and plaintiffs such that they may recover for their purely economic losses.” The court affirmed the dismissal of the investors’ other claims. In that pleading-stage ruling, the court assumed the complaint’s allegations were true for purposes of the appeal and took no position on whether they were accurate.

Can the regional center blame you for not doing your own diligence?

In the Fourth Circuit, Charlotte and Virginia cases, the defendants did, starting with the investors’ own signed statements. In the Virginia case, the subscription agreement recited that each investor had read the private placement memorandum (PPM) and “relied on nothing other than the Offering Materials.” In the Charlotte case, each investor acknowledged consulting his or her own advisers “to the extent the Investor has deemed necessary.”

A 2019 Fourth Circuit decision, 927 F.3d 177 (No. 18-2194), shows how far that went. Twenty-seven Chinese investors each paid $500,000 into a partnership that lent about $43 million to an electric-car startup. The offering documents were in English only, and the investors alleged they signed them without reviewing any version. They sued over public statements by the company’s co-founder and the head of the partnership’s general partner about cars sold and employees hired.

They lost. The Fourth Circuit first held that the complaint did not say which investor relied on which statement, or how. It then held that even a properly pleaded complaint would fail: “the written offering documents must control, and here they in fact contradicted the sorts of stray media statements attributed to [the defendants].” Reliance was not justified when the investors had not read the documents, translated them, or asked an advisor to review them before signing, and the court refused to create a duty to translate offering papers for foreign investors. The Supreme Court declined to review the case in December 2019.

When does a claim survive the “you signed it” defense?

In the cases below, the signed documents defeated claims based on statements those documents contradicted.

In the Charlotte case, a June 2026 North Carolina Business Court decision (2026 NCBC 59, No. 24CV055589), two Chinese investors who don’t speak English each paid $500,000 plus a $45,000 fee to join an EB-5 fund for a Charlotte, North Carolina hotel. They signed a 99-page English offering package without a full translation, relying on a one-page Chinese summary from the promoter. According to the complaint, they were told the developer had contributed $8 million to the hotel company when it had not.

The court applied the reasonable-reliance test at the pleading stage and split the claims. Theories that the documents contradicted were dismissed, including a promised return of principal, and the court said relying on the one-page summary “was not reasonable.” Fraud, negligent misrepresentation and state securities claims went forward, though, against the promoter and the GP on two statements. One was the alleged statement that the developer’s company was the hotel company’s other member and had contributed $8 million. The other was the promise that the hotel would not be sold before the investors’ I-829 petitions were decided. The offering memo said the fund would “endeavor to ensure” that, but the complaint alleges the promoter and the developers planned to sell the hotel as soon as construction ended, and the court explained that a promise made with no intent to keep it may be fraud.

Taking the allegations as true, the court held that the allegations about those two statements were pleaded with enough particularity to support a fraud claim against the promoter and the GP. As of the court’s June 2026 ruling, the case was at the pleading stage, and the court had made no findings of wrongdoing.

Which mistakes cost investors their claims?

Suing for the partnership instead of yourself. In two of these cases, courts treated claims that the GP mismanaged the fund as belonging to the partnership as a whole, so a single investor could not sue for them alone. As the Charlotte court put it, quoting the North Carolina Supreme Court, “one partner may not sue in his own name, and for his benefit, upon a cause of action in favor of a partnership.” In the Fourth Circuit case, the district court dismissed the fiduciary-duty claims for this reason, and the Fourth Circuit affirmed for the reasons the district court gave. In the Charlotte case, the court dismissed the investors’ individual fiduciary-duty claims, without prejudice, for lack of standing.

Waiting too long. In one case below, the clock started when the investors signed the PPM. In another, it started when warning signs appeared. In the Virginia case, a published Court of Appeals of Virginia decision (Record No. 0523-23-4, Oct. 8, 2024), four investors in the same electric-car venture sued in 2019 over marketing materials that the defendant conceded contained false statements, though he denied making them, and the court still held their claims were too late. The PPM they signed in 2012 and 2013 disclosed the risks, and the court treated it as a “big, flashing sign” that put them on notice. “Many of the false statements would have been obvious had appellants read or translated the PPM, and nothing prevented appellants from doing so,” the court wrote. It did not decide whether their reliance on the marketing was reasonable. The Supreme Court of Virginia refused the appeal.

In the Wilmington case, a North Carolina Business Court decision (2023 NCBC 47), investors in a Wilmington, North Carolina marina and hotel project sued in December 2021. Based on the investors’ own allegations, the court said it was evident that something was amiss by early 2014, when no hotel had been built and the marina was smaller than promised. Fraud claims against the promoters were dismissed as untimely, and those against the GP and its manager failed for lack of detail. The court wrote: “A plaintiff who ignores warning signs and fails to exercise reasonable diligence does so at their peril.” Contract and conversion claims against the GP survived, but by 2024 only two investors’ claims remained, and the court granted the GP and its manager summary judgment on them.

Frequently asked questions

Do the papers I signed end my case?

In the Fourth Circuit and Charlotte cases, courts rejected reliance on statements the documents contradicted. In the Charlotte case, a specific factual statement the papers did not contradict survived a motion to dismiss.

I don’t read English. Does that help?

It did not help the investors in the Fourth Circuit or Charlotte cases, where courts held them to English documents they signed without translating.

Is the regional center always responsible for checking the project?

In the Vermont case, the court tied the duty to the oversight the regional center promised investors.

What to do now

1. Gather your offering documents: the PPM, subscription agreement, limited partnership agreement, and any translations you received.
2. Save the marketing materials, brochures, seminar slides and messages from your migration agent or the regional center.
3. Write down what you were told about the project and its borrower, and who told you.
4. Keep every annual statement, K-1, fund-administrator report and project update.
5. Talk to your immigration counsel about I-526 and I-829 effects before taking action.
6. Consult a securities lawyer promptly. In the Virginia and Wilmington cases, investors lost claims because the clock started years before they sued.

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.