I just saw this article at http://www.natlawreview.com/article/eb-5-visa-step-step-direct-investment-model by Kate Kalmykov from Greenberg Traurig (and yes folks, it's THE Greenberg Traurig that has been mentioned in scandalous stories such as Jack Abramoff, etc.)
According to Ms. Kalmykov, the project goes to market, but it seems that she conveniently glosses over the fact that if US securities are being marketed overseas, they need the approval of overseas regulators to do so. Failure to do so is a clearcut violation of US and overseas securities laws. Moreover, failure to disclose the material fact that the securities were being illegally marketed and sold constitutes securities fraud under US laws. However, those are simply distractions, compared to the real issues:
- At the end of the day, any pooled "Direct Investment" with 2 or more EB-5 investors is basically a wolf in sheep's clothing, and has the same drawbacks that you'd see in a regional center: Lack of accountability, lack of control, pathetic ROI, capital losses and truly shitty exit strategies. A true "Direct Investment Business" usually has only one EB-5 visa seeker per business.
- Failure to disclose material facts and conflict of interest: I've personally verified that those who try to get EB-5 investors to invest in not so great franchises fail to disclose their financial incentives to do so. An honest business broker will only advise his clients to opt for safe franchises with proven track records such as KFC, 5 Guys, McDonalds, etc. or equally safe businesses such as used car lots, convenience stores etc.
- Exit strategies: Any business that has investor funds locked in for 5-9 years and doesn't permit the investor to sell and exit upon approval of their I829 is to be avoided, as it is basically a loss making regional center in disguise.
- A regional center or Partnership promoter who is fraudulently misleading EB-5 visa investors by claiming his partnership is a direct investment business can be easily caught by asking a simple question: How much money is the promoter putting and what is the promoter's share of equity and profits?
- Every partnership or regional center I know of has had EB-5 visa investors lose all or part of their capital. In contrast, in 10 years, I've yet to see my clients experience capital loss.
- In 10 years, I've yet to see regional center / partnership investors earn more than 1% annually, whereas my clients have earned between 15% and 50% annual return, with typical ROI of 22%.
- Approval times are much longer when regional centers or partnerships are involved, and are a lot shorter when they aren't involved.
- Partnership / regional center expect EB-5 visa seekers to pay for the mistakes of the partnership / regional center promoters, while I don't. As a matter of fact, I've probably the only business broker who does so.
If you'd like to hire us to help you start a business to qualify for the EB-5 visa, please contact me on +1 407 535 0616.
Mohammed Shaikh, MBA, CFE, Licensed Business & RE Broker (CA & FL)
Phone: +1 407 535 0616