(CN) – A Texas couple bilked foreign investors out of at least $5 million by offering them an investment opportunity with the added allure of being a path to legal U.S. residency, the Securities and Exchange Commission claims in Federal Court.
In a lawsuit filed in Houston, the SEC claims Marco and Bebe Ramirez and three companies they own — co-defendants USA Now LLC, USA Now Energy Capital Group LP and Now Co. Loan Services LLC — falsely promised investors their money would be invested as part of the EB-5 Immigrant Investor Pilot Program.
The EB-5 program provides foreigners an opportunity to earn conditional and permanent visas by investing in U.S. ventures that create or preserve jobs.
But instead of handling their client’s money as promised, the Ramirezes routinely diverted investor funds for their personal use and to open additional businesses, including a restaurant, the SEC says.
“Since 2010, defendants have perpetuated an investment scheme to defraud investors participating in the ‘EB-5 program,’ a federal visa initiative designed to give foreign investors a legal path to U.S. residency,” the agency says. “Through its expedited investigation, the commission has determined that defendants have fraudulently offered and sold at least $5 million in securities to at least 10 investors.”
At the outset of the scheme, the Ramirezes targeted potential investors in Mexico, but eventually expanded their illicit operations to include investors in Egypt and Nigeria, the agency claims.
“They told investors that USA Now would hold their investments in escrow until they received USCIS [U.S. Citizenship and Immigration Services] approval and that, once the funds were released from escrow, they would be used for specified business purposes,” the SEC says.
“But in fact, defendants failed to hold the funds in escrow as required under the escrow agreements, and instead routinely diverted investor funds, often on the day received, to other undisclosed businesses or for personal use that had not been described in offering materials,” it adds.
And in at least one case, the couple allegedly used new investor funds to make Ponzi-like payments to an existing investor.
“None of the investors identified by the commission to date have received even conditional visas, let alone green cards, from USCIS, and to the commission’s knowledge, none of the investors’ funds remain in escrow,” the SEC says.
Though the FBI served a search warrant on them July 2013, the defendants have continued the scheme, with Marco Ramirez and others traveling abroad to solicit investors, according to the SEC.
It charges the Ramirezes and their companies with committing, or aiding and abetting, securities fraud.
On Monday, U.S. District Judge Randy Crane granted the agency’s request to freeze the Ramirezes assets and those of their three companies, and barred them from selling securities.
A hearing on the SEC’s application for a preliminary injunction has been scheduled for Oct. 11.
The defendants’ receiver filed a motion Thursday to hire Cox Smith Matthews as counsel in the matter.
Along with the SEC’s lawsuit, the commission and the USCIS issued a joint alert about fraudulent EB-5 schemes. The USCIS administers the EB-5 program.
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