UPDATE: The federal district court for the Northern District of Illinois today sentenced the developer in the Chicago Convention Center EB-5 case, Anshoo Sethi. The sentence is three years imprisonment for defrauding investors. The sentencing is the culmination of civil enforcement action followed by criminal prosecution over a four-year period.
The CCC case is the first and largest EB-5 case in the United States involving securities offering fraud. Sethi made several false statements in order to solicit investors. Those statements included lies about having secured funding and tax credits from the State of Illinois and the City of Chicago. He further created fraudulent documents falsely claiming the involvement of several high-profile hotel brands and the financial backing of foreign governments.
Sethi, 32, of Chicago, pleaded guilty in 2016 to one count of wire fraud. In addition to the 36-month prison term, U.S. District Judge John Z. Lee also ordered Sethi to pay $8.85 million in restitution to the victim investors.
Sethi raised approximately $158 million from more than 290 investors. The U.S. Securities and Exchange Commission (SEC) brought a civil lawsuit against Sethi and was able to reimburse some $147 million to the investors. Unfortunately, all investors will lose their desired immigration benefits due to the fraud and termination of the project.
The case provides a bellwether example of how the U.S. government intends to prosecute EB-5 fraud cases. Fraud is a small but important fraction of the total activity under the EB-5 Program. Draft legislation in Congress is intended to enhance Program integrity and reduce the opportunity for fraud such as in the Chicago case. For further details, see the United States Attorney’s Office press release at https://www.justice.gov/usao-ndil/pr/hotel-developer-sentenced-three-years-prison-exploiting-us-visa-program .
By Michael G. Homeier