Investor’s $1 million not “at risk” due to sell option — petition denied even after attempt to remove option

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A Chinese national who invested $1 million in a Florida restaurant had his petition denied by U.S. Citizenship and Immigration Services (USCIS) for not meeting the “at risk” standard. The investor filed a lawsuit after his denial but a D.C. federal court upheld the decision. His petition was denied due to a provision in the EB5 investment agreement allowing the investor to sell back his shares at “book value” to the corporation.

While the investor argued that “book value” did not mean he was guaranteed the same amount he initially invested, the judge said such a distinction did not matter and the presence of a sell option itself was the deciding factor.

After the denial, the investor had submitted an amended investment agreement with a provision barring him from selling back his shares before approval of his petition — but USCIS refused to consider the change as petitioners are prohibited from making an after-the-fact material change to their petitions. The judge agreed with this decision as well.

Immigration lawyer Michael Harris comments on the importance of this case: “This decision shows a couple of key concerns for investors selecting an EB-5 project. One is that a fatal flaw in an EB-5 petition may be irreversible, and can kill an investor’s opportunity to succeed in the EB-5 program. Second, investors are playing with fire when a project offers them a return on their investment that is set on a predetermined amount, real estate asset, or similar guarantee.”

Read the memorandum opinion

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