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Transparency & Risk

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Transparency & Risk

Home >Transparency & Risk

EB-5 INVESTMENT TRANSPAREN​CY


A Guide to Understanding Risks and Identifying Red Flags


I’m Sam Silverman, one of the managing partners and founders of EB5AN. One of our core values at EB5AN is transparency, and in this article, I’m excited to share how you can assess whether an EB-5 project is being transparent in its risk disclosures.

Experience has taught me that EB-5 investors are often unaware of the risks of an investment if an EB-5 project isn’t transparent about these risks. Many EB-5 investors do not know what questions to ask.

If you don’t know the risks of an investment, you can’t make an informed choice. I don’t want you to be uninformed.

In this article, you’ll learn the basics of EB-5 project risk through an easy-to-follow framework. This framework will help you identify high-quality EB-5 projects that have less financial and immigration risk.

I want to emphasize that no investment framework will work 100% of the time. Every EB-5 project is unique and has various risks that need to be understood.

But if you carefully read this article and follow its simple suggestions, you’ll be in a much better position than most EB-5 investors to recognize and evaluate project immigration and financial risks.

This article will show you the most important questions to ask project sponsors and what good and bad answers look like. You’ll be able to easily apply this framework from project to project.

I founded EB5AN in 2013 after spending time in China during the early days of the EB-5 program. I saw many high-risk EB-5 investments in new real estate development projects get funded successfully. Developers raising EB-5 capital at this time were desperate for investment. They could not source capital from traditional U.S.-based real estate investors because of the high-risk nature of their projects.

Many of these projects later faced bankruptcy. Investors lost their money. The projects failed to create sufficient jobs, and EB-5 investors could not get or keep their Green Cards.

These projects failed for many reasons, some of which I’ll discuss below.

Over the last 10 years, I have reviewed hundreds of EB-5 projects from across the country. I’ve developed a list of questions to help potential EB-5 investors identify the most important issues when evaluating EB-5 projects. That list is available as a download in this article. In the sections that follow, I’ll provide you with some context and instructions for how to make the most of this list.


Basics of EB-5 Investment Risk

The EB-5 program requires investment funds to be “at risk” for an investor to qualify for a Green Card. This means that EB-5 investors must face the financial risk of losing their investment.

No Project Is Risk Free


No EB-5 project will be 100% free of financial and immigration risk. The level of risk, however, can vary among EB-5 projects. Even if a project meets all EB-5 program requirements, it may be high risk. In fact, many EB-5 projects carry levels of risk far above that required to satisfy the at-risk requirement of the EB-5 program.​

Hundreds of project sponsors and EB-5 regional centers offer projects to investors. Most of these projects meet the EB-5 program’s Green Card requirements as long as they follow their business plan. Project success, however, depends on a wide array of factors, including the project’s structure, the construction timeline, and the developer’s track record.

It’s important to note that USCIS, the U.S. government agency that oversees the EB-5 program, focuses on the at-risk and job creation requirements of the program. USCIS is not concerned about whether or when an EB-5 investor will receive his or her invested capital back.

As a result, EB-5 investors should take time to review multiple EB-5 projects. Since each project’s risks will be different, evaluating several projects helps an investor identify the project that is most likely to result in successful immigration and a return of his or her investment.

A recent Government Accountability Office report noted that less than 1% of EB-5 investments were lost due to fraud. This is a small number. The key word, however, is “fraud.”

The actual percentage of EB-5 investors who lose funds is much higher than 1%.

Not many EB-5 investors lose money due to fraud or illicit activity by a “bad actor.” Instead, they invest in high-risk EB-5 projects, often unknowingly. Then the project does not perform well and faces financial issues.

Often when a project is a financial failure, it also fails to create enough jobs for EB-5 investors to meet the EB-5 program’s job creation requirement. In this way, financial risk is tied directly to immigration risk for EB-5 investors.

​​Why Do Risky Projects Attract Investors?

Why would an EB-5 investor choose a project with more risk? Usually, these investors either do not know when the risk of a project is higher than what is required by the EB-5 program or they do not carefully compare different projects before investing.

To participate in the EB-5 program, investors must be foreign nationals born outside of the United States. Some EB-5 investors may already be in the United States on other visa types such as H-1B, F-1, E-2, etc. Most, however, are living outside the United States when they invest.

Many EB-5 investors have little experience with the United States. Even fewer understand U.S. real estate development projects or U.S. securities laws.

Additionally, while EB-5 investors hire immigration attorneys, these attorneys check whether a project meets EB-5 requirements. They do not generally provide advice on the financial feasibility or the investment risks of a project.

Many EB-5 investors invest large sums of money in a country and industry they don’t know well, and they have to deal with complex U.S. securities laws they are not familiar with. Most EB-5 investors simply are not equipped to make good EB-5 investment decisions. As a result, many development projects that are unable to obtain financing from public or private markets in the United States successfully raise EB-5 financing.

EB5AN’s Approach to Protecting EB5 Investors

While living in China in 2011 and 2012, I watched as projects raised EB-5 capital from investors who simply did not understand the risks involved. Many investors lost their money and immigration status. I wanted to provide a better option, so my partner, Mike Schoenfeld, and I founded EB5AN.

We decided to identify projects that needed below-market investment capital but were not dependent on those funds to be successful. We then structured EB-5 investments for these projects with a focus on investor safety and success.

Our approach works. Our EB-5 investors have benefited from our conservative and transparent approach to EB-5 investment. Now, ten years later, we have built one of the largest EB-5 regional center platforms, with over 10 regional centers serving more than 30 states and U.S. territories.

Every regional center EB-5 project for which we act as a fiduciary for EB-5 funds has been successful.

  • Each of these projects is either completed or on track.
  • All EB-5 capital is either repaid or in good standing.
  • All EB-5 job creation requirements are either met or on track.

We are one of the few—if not the only—large-scale regional center operators that have not lost any regional center investment funds, had USCIS project denials, faced bankruptcy, defaulted on a loan, been fined by the SEC, or been sued by EB-5 investors.

One of the reasons our approach has been successful is that it addresses the main concerns of EB-5 investors. The number one question I hear from EB-5 investors is, “How do I keep my investment safe and make sure my family gets Green Cards?” The answer is that investors need to become familiar with U.S. securities laws and real estate development investment. This may sound daunting, which is why we have created this resource—to help make this essential task easier.

In the following section, we will briefly cover U.S. securities laws as they relate to EB-5 investments. Understanding these laws is vital to understanding the risks that come with EB-5 investment, how these risks are disclosed, and how to avoid unnecessary risks.

Basics of U.S. Securities Laws

Explore how U.S. securities laws govern EB-5 investments, balancing investor opportunity with regulatory oversight.

EB-5 Investments: Compliance and Risk Overview

Lower Regulatory Standards

U.S. securities laws mainly protect American investors.EB-5 investors are foreign nationals and usually accredited, so EB-5 projects face less strict regulations.This means EB-5 projects can carry more risk than typical U.S. investments.


Risks Can Be High if Disclosed

EB-5 investments are typically private offerings, not for the general public.These projects must disclose key risks in writing, but the risks can still be significant.Investor funds must be “at risk,” though not necessarily extremely risky to qualify.

This point is crucial. Consider two real-life EB-5 projects available in the market today:

​1. Home Project EB-5 Loan

Builds single-family homes; construction already in progress.Approved by senior lenders and already profitable.1,000+ EB-5 jobs created; $200M+ spent; 500+ homes sold.

Loan secured by a strong parent company guaranty.Developer has 25+ years of experience with a solid repayment record.

Lower risk: proven success, secured loan, ongoing operations.

2. Rental Project EB-5 Loan

Plans to build hotel/apartment complex; construction not started.Few EB-5 jobs created; success depends on future rental income.Loan is unsecured, and the developer has no repayment track record.Financing depends on future refinancing, which may be expensive or unavailable.All parties are related, creating conflicts of interest.

High risk: uncertain financing, no security, no track record.

Checking Offering Documents for Risks Is Essential

Selecting a low-risk EB-5 project can be challenging. You must carefully review the project’s offering documents — what’s missing can be as important as what’s included.

Never rely on verbal promises.

Only the details written in official offering documents or provided in writing are valid under U.S. law.

Before investing:

  • Prepare a list of questions.
  • Review all disclosures carefully.
  • Verify everything in writing.

Following are three example situations that we often see.

 Senior Loan Risk
  • Salespeople may claim a project already has a senior loan.
  • But documents may reveal the loan is not yet secured.
  • If the loan isn’t obtained, the project may never be completed.
  • This means no jobs created and possible loss of investment.
  • Ask to see the loan agreement and bank statements.
  • If refused, it’s a major red flag.
Repayment Risk
  • Repayment may depend entirely on future project profits or a sale.
  • If the project earns less than expected, investors might not be repaid.
  • Hospitality and residential projects often have this issue.
  • Be cautious if there’s no repayment guarantee from another company.
  • Avoid projects relying solely on future cash flow.
Developer Risk
  • Developers may claim to be financially strong without proof.
  • Request their financial statements before trusting such claims.
  • If they refuse, that’s another warning sign.
  • Legitimate developers can legally share financial information.
  • Without this data, you cannot assess the project’s stability.
  • Even with reports, analyze carefully—avoid weak financials.


Key Takeaways

  • • Verify all information in writing.
  • • Review complete offering documents.
  • • Be alert to missing details in disclosures.
  • • Request loan, repayment, and financial proofs.
  • • Avoid projects with unclear or unverified data.


Alternatively, if the salesperson provides the financial statements you request, carefully review them. If they reveal that the project development company or guarantor is not as financially strong as suggested, you should avoid investing in this project.