US markets regulator SEC has charged an Indian-origin person of running a fraud investment scheme, wherein Chinese investors and other investors were allegedly duped of at least $150 million (over Rs. 800 crore) in hope of green-card American residency.
The Securities and Exchange Commission (SEC) said in a statement that a district court has granted it a "temporary restraining order and asset freeze" against 29-year old Anshoo Sethi and two of his companies involved in running this fraudulent scheme, as its investigations continue further.
As per SEC's charges, Illinois-based Sethi created two entities, namely A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC), and fraudulently sold more than $145 million in securities and collected $11 million in administrative fees from more than 250 investors primarily from China.
Sethi and his companies duped investors into believing that by purchasing interests in ACCC, they would be financing construction of the "World's First Zero Carbon Emission Platinum LEED certified" hotel and conference centre near Chicago's O'Hare Airport, SEC said.
"Investors were misled to believe their investments were simultaneously enhancing their prospects for US citizenship through the EB-5 Immigrant Investor Pilot Program, which provides foreign investors an avenue to US residency by investing in domestic projects that will create or preserve a minimum number of jobs for US workers," it added.
According to the SEC's complaint filed in US District Court for the Northern District of Illinois, the EB-5 program enables foreign investors to possibly qualify for a green card if they invest $1 million (or $500,000 in a Targeted Employment Area with a high unemployment rate) in a project that creates or preserves at least 10 jobs for US workers, excluding the investor and his or her immediate family.
SEC's complaint further said that 29-year-old Sethi claimed to have "over fifteen years of experience in real estate development and management", while the project's developer was projected as having experience of more than 35 years of experience despite being set up only in 2010.
Sethi and his companies have also been accused of falsely boasting to investors that they had acquired all the necessary building permits and that several major hotel chains had signed onto the project.
They also provided falsified documents to US Citizenship and Immigration Services (USCIS) — the federal agency that administers the EB-5 program — in an attempt to secure the agency's preliminary approval of the project and investors' provisional visas.
Sethi and his firms spent more than 90 per cent of the administrative fees collected from investors despite their promise to return this money to investors if their visa applications are denied, while over $2.5 million of these funds were directed to Sethi's personal bank account in Hong Kong, SEC said.
"Sethi orchestrated an elaborate scheme and exploited these investors' dream of earning legal US residence along with a positive return on their investment in a project that was not nearly the done deal that he portrayed," SEC said.
Accusing Sethi of submitting false claims about the project, SEC said that such documents provided by him to the relevant agencies included a comfort letter from Hyatt Hotels and a backup financing letter from Qatar Investment Authority.
SEC has further said that Sethi and his companies made a number of misrepresentations about the project to dupe investors and the marketing materials of the project claimed participation of three major hotel chains in the project: Hyatt, Intercontinental Hotel Group, and Starwood Hotels.
"However, none of these hotel chains have executed franchise agreements to include a brand hotel in this project as represented to investors in the offering materials.
"Two of the chains actually terminated prior deals with other Sethi-related entities more than two years before these offering materials were circulated to investors," SEC said.