Three Houston-based real estate developers violated federal securities fraud laws when they misused investor funds under an immigration program created by President George H.W. Bush in 1990.
The U.S. Securities and Exchange Commission announced Wednesday that America Modern Green Senior, America Modern Green Community and America Modern Green Residential have agreed to settle charges that they improperly used $49.5 million they raised from 90 Chinese investors for a project under the EB-5 Immigrant Investor Program.
The three developers told investors that their funds would be used exclusively for a large mixed-use real estate development EB-5 project, according to federal court documents filed by the SEC.
Instead, the developers improperly transferred $20.5 million of investor funds for various undisclosed and improper purposes, including funding purchases with respect to two unrelated real estate projects, the SEC claims.
The SEC also claims that the developers’ offering materials improperly described the titles and roles of two real estate experts.
“These developers obtained almost $50 million from investors in connection with an EB-5 offering that was based on misleading statements and involved a misuse of the funds raised,” SEC Regional Director Shamoil Shipchandler said in a written release.
“Today’s resolution provides full relief to all of the affected investors,” said Shipchandler, who leads the SEC’s Fort Worth Regional Office.
Under the agreement, the three developers are paying a disgorgement of $49.5 million, $1,144,135 in interest and $800,000 in penalties.
SEC staff attorney Sarah Mallett led the investigation. The SEC appreciates the assistance of U.S. Citizenship and Immigration Services.