The U.S. Securities and Exchange Commission has alleged that foreign investors lost a total of $21 million in a Florida EB-5 hotel scam in Palm Beach, Florida.
According to the regulator, Robert V. Matthews and Joseph J. Walsh Sr., and their related entities — Palm House Hotel LLLP and South Atlantic Regional Center LLC — used the funds meant for a hotel project to pay for lavish personal expenses.
EB-5 Funds Used for Personal Expenses
Through the EB-5 visa program, Matthews and Walsh collected $44 million from at least 88 foreign investors who sought to obtain green cards, promising to use the funds for the acquisition, development, and operation of the Palm Beach Hotel in Palm Beach, Florida.
The EB-5 program allows foreign nationals who invest at least $500,000 in a U.S. business to obtain green cards. Instead, the two used a significant portion of the money received for the purchase of a 151-foot yacht and for "saving" a Florida mansion from foreclosure.
Investors Take Action Against Scammers
In November 2016, more than 50 Chinese nationals and five Iranian citizens filed a suit against Walsh and Matthews, alleging they were defrauded out of approximately $50 million.
According to court documents, the investor’s funds were supposed to be held in escrow until the U.S. government approved their I-526 petitions for the EB-5 visa program, but instead, the money was improperly transferred to other accounts and used by Walsh and Matthews, as well as other co-conspirators.
SEC Seeking Civil Penalties and Disbarment
According to the SEC’s complaint filed in the Southern District of Florida, the SEC is asking the court to order Matthews, Walsh, and their related entities to pay civil penalties and disgorge ill-gotten gains plus pre-judgement interest for the EB-5 hotel scam.
In addition, the SEC also is asking the court to permanently bar Matthews and Walsh from the securities industry to prevent them from violating federal securities laws in the future.
The SEC noted that the hotel in question has yet to be completed and is the subject of a foreclosure lawsuit.
Have You Lost Money in an EB-5 Scam?
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