n Indian-origin man and two companies he founded will pay nearly USD 14 million in penalties to US regulators to settle charges that he raised about USD 158 million by defrauding hundreds of foreign investors who were seeking American residency.
The US Securities and Exchange Commission had alleged that Anshoo Sethi, 30, created A Chicago Convention Center (ACCC) and Intercontinental Regional Center Trust of Chicago (IRCTC) and raised about USD 158 million from close to 300 investors as part of a fraudulent scheme that targeted foreign nationals who sought to invest in the US economy and gain US citizenship through a federal visa programme.
The US District Court in Chicago entered the consent judgment against Sethi and his two firms on March 17 under which he and his companies are jointly liable to pay over USD 11.5 million in disgorgement and prejudgement interest.
Sethi is also required to pay a million dollars in civil penalties and his firms ACCC and IRCTC have been slapped with penalties of up to USD 1.45 million each.
The court has also enjoined and restrained Sethi and his firms from offering or selling securities issued by any entity owned or controlled by Sethi for 20 years.
ACCC and IRCTC agreed to wind up and dissolve after satisfying their payment obligations. The defendants will pay the penalties in part through funds frozen in certain bank accounts and by selling property held in ACCC's name.
The SEC had filed its case in February 2013 and obtained a temporary restraining order and asset freeze against Sethi, ACCC and IRCTC.
In April last year, the court granted the Commission's motion to return to investors USD 147 million of principal that had been frozen in certain bank accounts. Sethi, ACCC and IRCTC neither admitted nor denied the SEC's allegations.
Sethi and his companies duped investors, primarily from China, into believing that by purchasing interests in ACCC, they would be financing construction of a convention center, hotel complex and amenities including restaurants, lounges, bars, and entertainment facilities.
Investors were misled to believe their investments were simultaneously enhancing their prospects for US citizenship through the EB-5 Immigrant Investor Pilot Programme, which enables foreign investors to possibly qualify for a green card if they invest a million dollars in a project that creates at least 10 jobs for US workers.
The SEC alleges that Sethi and his companies falsely boasted to investors that they had acquired all the necessary building permits and that several major hotel chains had signed onto the project.
They also provided falsified documents to US Citizenship and Immigration Services (USCIS) — the federal agency that administers the EB-5 program — in an attempt to secure the agency's preliminary approval of the project and investors' provisional visas.
Meanwhile, Sethi and his companies had spent more than 90 per cent of the fees collected from investors despite the promise to return the money to investors if their visa applications are denied. Over USD 2.5 million of these funds were directed to Sethi's personal bank account in Hong Kong.
"Sethi orchestrated an elaborate scheme and exploited these investors' dream of earning legal US residence along with a positive return on their investment in a project that was not nearly the done deal that he portrayed," said Stephen L Cohen, Associate Director in the SEC's Division of Enforcement.
According to the SEC's complaint, Sethi misrepresented to investors in offering materials that he has over 15 years of experience in real estate development and management, specifically in the lodging area.