A California-based businesswoman pleaded guilty to defrauding investors in a $20 million EB-5 scam.
Ruixue “Serena” Shi was originally accused of fraud in 2020 after investors became anxious about potential fraud and demanded refunds. Between 2015 and 2018, Shi enticed Chinese investors to put money into a development that was supposed to be based in California’s Coachella Valley. The proposed development was a luxury condo-hotel property with over 200 units and nearly 100,000 square feet in state-of-the-art amenities.
Shi reportedly told investors that their money was part of the United States EB-5 immigration program, which allowed foreign investors to invest money in the US in exchange for a visa. This is a popular immigration program for wealthy foreigners, but it is highly susceptible to fraud.
In this case, Shi convinced dozens of investors that their investments would result in valid visas after making their investments. However, this was not the case. Instead of using investors’ money for the development, Shi funded her lavish personal lifestyle, including luxurious vacations, cars, clothes, and more. Authorities found that Shi spent millions of dollars on these expenditures before she was caught.
We continue to see rampant fraud in this immigration program, especially since the beginning of the pandemic. Unfortunately, fraudsters have taken advantage of their victims in a time of crisis and uncertainty.
If an individual or company approaches you for an investment opportunity via the EB-5 program, it is crucial to take these three precautions before acting:
- Verify the party. Verification is crucial in an EB-5 investment. Investors should be aware that there are many fraudsters that lie about their identities and/or impersonate other successful people in a given industry. Thus, investors must know exactly who they are doing business with before they hand over their hard-earned money.
- Conduct proper, independent due diligence. Salespeople are more than ready to tell you the benefits of their investments, but they are usually not ready to warn you about the risks. We have seen a number of investors fail to conduct proper due diligence by an independent, unbiased party before writing out a check to the individual or company. This is an important step that must not be overlooked in this type of transaction.
- Be prepared. No investment is a guarantee. However, there are certain steps you can take to prepare yourself to make a legitimate investment. Part of any investment process is recognizing the risk involved and the likelihood of losing that investment. Don’t be swayed by salespeople who claim that the investment is “risk-free.” Do your homework and determine whether this is a legitimate investment opportunity to accomplish your financial goals and needs.