September 23, 2020

Volume X, Number 267

September 23, 2020

Subscribe to Latest Legal News and Analysis

September 22, 2020

Subscribe to Latest Legal News and Analysis

September 21, 2020

Subscribe to Latest Legal News and Analysis

Quiros to Pay $84 Million for EB-5 Investment Fraud

On February 2, 2018, the U.S. Securities and Exchange Commission (SEC) announced an $84 million settlement ($81.4 million in disgorgement, $2.5 million in prejudgment interest, and a $1 million civil penalty) with Jay Peak ski resort owner Ariel Quiros. The SEC brought charges against Quiros in early 2016 after discovering his nearly decade-long scheme perpetrated through the EB-5 Immigrant Investor Program (EB-5 Program). The EB-5 Program offers foreign investors the chance to earn permanent residence in the U.S. if they make an investment of $1 million or $500,000 in U.S. project that creates or preserves at least 10 jobs.

Quiros and William Stenger, the president and CEO of Jay Peak (who has already agreed to cooperate with the SEC), used the EB-5 program to raise more than $350 million from 700 foreign investors for the construction of Jay Peak ski resort in Vermont. Unfortunately for the investors, a majority of their money was never used to construct the ski resort or create jobs. According to the SEC’s complaint, Quiros and Stenger misused more than $150 million of the foreign investors’ money in a “Ponzi-like fashion” to cover losses in unrelated projects. In addition, Quiros used more than $50 million of the investors’ money as his own personal piggy bank, which included the purchase of a luxury condominium, payment of his income taxes, and the acquisition of an unrelated resort.

This $84 million settlement represents only one of the many lawsuits initiated as a result of the fraudulent EB-5 project. In another suit, Jay Peak’s EB-5 investors filed a class-action lawsuit against Raymond James, which held the investors’ funds, and its former branch manager, Joel Burstein, for facilitating the scheme. According to court documents, Raymond James and Burstein aided and abetted the fraud by, among other things, providing millions of dollars in loans to Quiros that were collateralized with the EB-5 investors’ funds, even though they knew that the funds belonged to the investors. In April 2017, Raymond James agreed to a record-setting EB-5 settlement of $150 million with the investors. Citibank also agreed to a $13.3 million settlement for extending a $15 million personal line of credit to Quiros, which was also secured by using investors’ funds as collateral.

In total, the fraudulent EB-5 project and the subsequent litigation lasted more than a decade. In recent years, the SEC has utilized whistleblowers to detect and halt ongoing EB-5 investment fraud well before it grows to Jay Peak’s magnitude. In exchange for information about EB-5 fraud (or any other securities law violation), the SEC offers monetary awards to whistleblowers under its SEC Whistleblower-Reward Program. The SEC has already issued a $14.7 million SEC whistleblower award to a whistleblower who reported EB-5 investment fraud (see details below).

© 2020 Zuckerman LawNational Law Review, Volume VIII, Number 36


About this Author

Jason Zuckerman, Whistleblower Litigation Attorney, Washington DC  Law Firm

Described by the National Law Journal as a “leading whistleblower attorney,” Jason Zuckerman litigates whistleblowe r retaliation, whistleblower rewards, wrongful discharge, and other employment-related claims. His practice focuses on representing senior executives and senior professionals in high-...

(202) 262-8959
Matthew Stock, CPA, Auditor, Zuckerman Law Firm
Certified Public Accountant

Matthew Stock is the Director of the Whistleblower Rewards Practice at Zuckerman Law. He is an attorney, Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. Mr. Stock has audited a broad range of industries, both domestically and internationally, including large public companies and financial institutions. As an auditor, Mr. Stock developed an expertise in financial statement analysis and fraud recognition.

At Zuckerman Law, Mr. Stock leverages his experience as an attorney, CPA, CFE and external auditor to assist whistleblowers investigate and disclose complex financial frauds to the government. His practice focuses on representing whistleblowers in rewards cases at the SECCFTCDOJ and IRS. In addition, Mr. Stock assists whistleblowers in Sarbanes-Oxley whistleblower retaliation cases, analyzing a wide range of accounting issues, including financial statement fraudinadequate internal controls, and issuer disclosure violations.