[Also available on LinkedIn.]
As with any significant investment, extensive due diligence is prudent before writing a check. There are several common red flags that should give any investor pause when they encounter them. One major red flag that can come up in the EB-5 context is if the developer has a limited or hard to verify track record. Fraudsters will frequently puff up their back stories to include successes that are half truths and omit failures and past conflicts with colleagues. Don’t just rely on what the project presents in a sales pitch or on the advice of people that that get paid based off your investment. Do your own due diligence or hire independent counsel to assist.
For example, although it was undisclosed to investors, some digging would have revealed that the “genius developer” behind the notorious Jay Peak EB-5 fraud had a previous lawsuit filed against him by disgruntled investors for breach of contract and some other questionable business dealings.
Investor lawsuits after the fact can sometimes result in great recoveries, but it is always far better to avoid the problematic investment to begin with if at all possible.