EB-5 Immigrant Investor Program: Three Major Risks of U.S. EB-5 Investment Immigration (Part 2)
EB-5 Immigrant Investor Program: Three Major Risks of U.S. EB-5 Investment Immigration (Part 2)
Attorneys:Attorney Jeff Zhengquan Xie,Attorney Jiarui Yin,Attorney Qian Zhao,Attorney Haochun Ling, Xiang Xiao
Beyond the investment risk discussed in Three Major Risks of U.S. EB-5 Investment Immigration (Part 1), there are two other key risks associated with U.S. investment immigration, which we refer to as immigration risk and personal integrity risk.
Immigration risk refers to the uncertainty surrounding whether an investor can successfully achieve the goal of immigrating to the U.S. after making their investment.
An EB-5 applicant must navigate two stages of risk to secure successful immigration status.
The first stage of risk hinges on whether Form I-526E (Immigrant Petition by Regional Center Investor) will be approved by U.S. Citizenship and Immigration Services (USCIS). A denial at this stage essentially means the investor’s effort to immigrate to the U.S. has failed.
A Form I-526E denial may stem from issues with the investment project itself—for example, the project was never launched or was discontinued midway.
Denial can also result from flaws in the project’s documentation. This includes the inclusion of legally prohibited clauses in the project’s legal documents, such as guarantees of principal or risk-free returns provided by the project sponsor.
Additionally, a Form I-526E may be rejected due to problems with the documentation proving the source of investment funds. Examples include fraudulent source-of-funds materials, inconsistencies or gaps in the explanation of fund origins, or failure to account for portions of the investment capital.
After Form I-526E is approved, the applicant enters a waiting period for visa availability (visa queue). Once their priority date becomes current, they will receive an immigrant visa to enter the U.S., where they are granted a conditional green card valid for two years.
Before the conditional green card expires, the investor must apply to convert it to a permanent green card. This marks the second stage of immigration risk.
If an EB-5 investor fails to clear this second hurdle, their attempt to immigrate to the U.S. is deemed unsuccessful, as they will no longer be eligible to reside in the country legally.
A critical requirement for converting a conditional green card to a permanent one is that the investor’s capital must have directly or indirectly created 10 full-time jobs in the U.S.
For investors who select regional center projects, they do not participate in the day-to-day operation and management of the invested enterprise. As a result, they have no control over or ability to determine whether their investment has generated the required 10 direct or indirect jobs.
Therefore, the responsibility of proving to USCIS that the investment has indeed created 10 qualifying jobs falls squarely on the project’s management team. Naturally, the immigration attorney handling the application also plays a vital role in this process.
This is where the third risk—personal integrity risk—comes into play if an EB-5 investor ends up with an incompetent project management team or an unqualified immigration attorney.
In truth, the term "personal integrity risk" is not a perfectly precise description.
What we aim to convey is that human factors are critical to the success of an EB-5 investment immigration application.
If a project sponsor intends to defraud EB-5 investors from the outset, the investment immigration project they operate is highly likely to fail.
If a project sponsor lacks sufficient capital or operational capabilities, the project they oversee may end up as an unfinished project.
If a project sponsor embezzles or misuses project funds or investor capital, the project will collapse due to a broken capital chain.
For this reason, it is imperative for EB-5 investors to conduct thorough due diligence on project sponsors before committing to an investment.
In addition to the project sponsor, the immigration attorney responsible for filing the application also has a significant impact on whether an EB-5 investor can successfully obtain U.S. residency through investment.
If an EB-5 investor hires an attorney who is unfamiliar with preparing EB-5 source-of-funds reports, the application may be subject to a request for evidence (RFE) or even result in a final denial.
If the retained immigration attorney has ethical issues, they may advise the client to submit fraudulent materials or take improper shortcuts, ultimately ruining an otherwise viable application.
Of course, an immigration attorney who lacks expertise or experience in EB-5 cases can also lead to numerous complications and even the denial of the application.
Thus, it is equally critical for EB-5 investors to conduct due diligence on an attorney’s competence, experience, and professional ethics before retaining their services.
That said, the vast majority of licensed U.S. attorneys typically fulfill their fiduciary duties diligently, as they are mindful of the risk of facing client complaints or malpractice lawsuits that could lead to liability for damages.
The above overview is prepared by XIE LAW OFFICES,LLC. to provide legal information to the Chinese community. It is primarily for academic discussion purposes and does not constitute legal advice on specific cases. If you already have legal representation, please consult your own attorney, who is familiar with the details of your case. Clients of Xie & Associates Law Firm, as well as readers who have not yet retained legal counsel, may contact Attorney Xie for specific legal questions. If you wish to reprint this document, please do so in full without any deletions, and clearly indicate the source.
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