The community investment funds in California have attracted many immigrant investors over the years. However, some fraudulent cases have occurred, exploiting investors’ lack of English proficiency and asymmetric information. Recently, China’s Guangzhou Intermediate People’s Court partially recognized and enforced the first batch of rulings involving EB-5 immigration fraud in the California Investment Immigration Fund (CIIF) case. This sets an important precedent for victims seeking redress for similar immigration fraud cases.
EB-5 visa immigrant investor program overview
The EB-5 visa program was created by the U.S. Congress in 1990 to attract foreign investment and create U.S. jobs. Immigrant investors can obtain U.S. green cards by investing in American businesses. However, some bad actors have exploited this program by defrauding investors eager for U.S. residency. The U.S. views such fraud cases harshly.
How EB-5 fraud cases are determined in the U.S.
The U.S. courts determine EB-5 fraud under Securities and Exchange Commission Rule 10b-5 on securities fraud. If misrepresentation, negligence or concealment of facts by defendants are proven, punitive damages can be awarded under California state law in addition to actual losses.
Punitive damages face obstacles to recognition in China
While common law systems like the U.S. allow punitive damages, Chinese law takes a more cautious stance. Exceptions exist in certain domains like IP and environmental law. However, the SPC guidelines indicate Chinese courts may choose not to recognize the portion of foreign rulings with punitive damages greatly exceeding actual losses.
The partial recognition of U.S. court rulings on EB-5 fraud injects a positive element into mutual recognition of judgments between China and the U.S. This case provides important practical guidance for victims seeking redress.