Dismissal of Multimillion Dollar Fraud Lawsuit Highlights the Importance of Due Diligence for EB-5 Investors

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On Thursday, February 28, 2023, Hon. Lewis J. Linman, U.S. District Judge for the Southern District of New York, dismissed a $57 Million fraud case against the New York Regional Center by foreign investors who had invested in the George Washington Bridge Bus Station and Infrastructure Development Fund, LLC.

This case highlights the importance of investors to perform their due diligence prior to making investments, especially for those who do not speak English.

Potential investors must reasonably and diligently investigate evidence of fraud. “[T]he law prevents a contracting party from turning a blind eye to obvious falsehoods. Otherwise, one who suspects misrepresentation could remain willfully ignorant, enjoy the benefits of a bargain, and then strategically “discover” a fraud that she had suspected all along to avoid performance if circumstances worsen. Fraud in the inducement is not an insurance policy. The doctrine of reasonable diligence prevents a party who is on notice of misrepresentations from overlooking her claim in order to enjoy the benefits of an agreement and to shift its risks onto her counterparty.” Wen et al v. New York City Regional Center, LLC, No. 1:2022cv07383 – Document 21 (S.D.N.Y. 2023) at 20.

Additionally, potential investors must do everything necessary to understand the contents of all contracts prior to signing. “[A] claim of illiteracy in the English language is, by itself, insufficient to avoid the rule that ‘[a] party who signs a contract without any valid excuse for having failed to read it is conclusively bound by its terms.”  Wen at 26.

“In sum, the Investor Plaintiffs were on inquiry notice of the alleged frauds when they entered the subscription agreements. Their failure to exercise reasonable diligence is no excuse.” Wen at 28.

Read the full opinion here.

As with all investments, there are inherent risks. The investor should be well informed about these risks and understand the particular complexities of this visa. It is critical that investors understand the need to collaborate with entities that do not have conflicts in the alignment of interests and are working in concert. USILAW encourages safe investments and genuine partners so that outcomes can be positive and the results match the intention of the law both in spirit and essence. USILAW ensures that our foreign investor clients benefit from long-term visibility on important issues that influence their interests and planning.

USILAW does not represent any regional center. Consequently, it does not have any intrinsic interest in swaying the investor into a particular investment. USILAW strictly provides legal advice and support and is agnostic about which investment the client ultimately chooses. USILAW’s service is embedded with the philosophy that client interests are paramount. Not representing a Regional Center allows us to offer clarity and unconstrained advice.

Contact us to schedule an initial consultation with our immigration attorneys today for more information.

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