Can an investor replace misappropriated funds? The AAO says no

Posted by EB5Admin on November 15, 2019

EB-5 expert Suzanne Lazicki speaks to the important question of whether an investor who is the victim of fraud can replace misappropriated capital himself to remain eligible for approval. In one case she cites, an investor offered to replace $185,000 of capital misappropriated by a bad actor. But the Administrative Appeals Office (AAO), says no: “The foreign investor must show that his or her investment of at least $500,000, in its entirely, has been available, without interruption, to the NCE for job creation.”

Lazicki points out that the key phrase is “without interruption.” The petitioner has to have invested, or have been actively in the process of investing, the full amount of capital before filing his I-526.

But this case features an investor trying to make amends for capital diverted by other players. USCIS policy seems to simply deny this kind of correction: “The replacement of EB-5 capital with other funds does not equate to a return of the original capital attributed to the investor, even if both originate from the same source.” 

Lazicki makes it clear that for the $185,000 replacement capital to be accepted, the petitioner must have invested that amount, or have been actively in the process of investing that amount, before filing his I-526. 

USCIS is missing the point here. No investor has a crystal ball and would expect to be defrauded before filing his or her I-526. The issue of replacing diverted capital is predicated on an investor being defrauded after filing, not before. The investor’s capital was at risk — he lost $185,000 of it — so why can’t policy accommodate an investor going above and beyond the required investment amount to make amends for the criminal activity of others?

This story appears to be directly related to the third question Sarah Kendall addressed in her remarks to IIUSA EB-5 forum: When a defrauded investor takes corrective action, can USCIS support rather than punish that investor?Kendall’s answer reiterated the inflexibility of USCIS on this point: investors must be eligible at the point of filing and throughout the process of adjudication. Corrective action after filing is a non-factor.

Read Lazicki’s blog 

See the AAO’s statement on the case in question

  
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