By Alexandra Hughes, Fall 2015 Student Intern
On August 24, 2015, the SEC filed a complaint in the U.S. District Court for the Western District of Washington against Lobsang Dargey, a former Tibetan monk, and owner of the “Path America” companies. In its complaint, the SEC alleged Dargey defrauded Chinese investors seeking U.S. residency through the EB-5 Immigrant Investor Pilot Program.
The EB-5 program allows foreign citizens to potentially qualify for U.S. residency in connection with making a qualified investment of at least $500,000 to a project that either creates or preserves 10 jobs for American workers. Dargey allegedly used the EB-5 program as a platform for enticing Chinese investors to invest in two real estate projects—a downtown Seattle skyscraper and a mixed-use development in Everett, Washington. These two projects had approved business plans from the U.S. Citizenship and Immigration Services (USCIS).
The SEC alleges that Dargey, through two of his “Path America” companies—Path America SnoCo and Path America KingCo—raised approximately $125 million from 250 Chinese investors. Dargey told both the USCIS and the Chinese investors that he would use the invested money only for the two EB-5 qualifying real estate projects.
However, instead of putting this money to its intended purpose, the SEC alleges Dargey used $14 million for unrelated real estate projects and $3 million for his personal use which included purchasing a $2.5 million house and spending time at casinos. By misusing this investment money, Dargey jeopardized the Chinese investors’ chances of U.S. residency.
On August 24, the district court granted the SEC’s request for an asset freeze of Dargey and his “Path America” companies. The district court also entered an order prohibiting Dargey and his “Path America” companies from soliciting investors. Additionally, the district court ordered Dargey to repatriate funds transferred to overseas bank accounts.
For more information about this announcement, visit the SEC’s website. For more information about the EB-5 program, visit the U.S. Citizenship and Immigrant Services website. According to the U.S. Government Accountability Office, the EB-5 program is susceptible to the kind of fraud Dargey has been accused of and foreign investors should beware.