What If Your EB-5 Project Fails or Goes Bankrupt?

The EB-5 Immigrant Investor Program offers a pathway to U.S. residency, but investors must commit significant capital to a commercial enterprise. While the goal is job creation and project success, applicants must prepare for the possibility of project failure or bankruptcy. Understanding the implications for your I-526/I-829 petitions and your investment is crucial.

Understanding EB-5 Investment Risk

The EB-5 program requires an "at-risk" investment. This means the principal capital is subject to market risks inherent in any commercial venture. Failure does not automatically equate to fraud, but it does trigger specific procedural hurdles for the investor.

Distinction Between Project Failure and Fraud

• Project Failure: The business plan was sound, but external market forces or poor management led to insolvency. This is a business risk.
• Fraud: Misrepresentation of the investment opportunity or misuse of funds by the Regional Center or New Commercial Enterprise (NCE).

Impact on the I-829 Petition (Permanent Residency)

The primary concern for an investor whose project is failing during the two-year conditional residency period (after filing I-829) is demonstrating that the capital was genuinely "fully deployed" and that the required 10 qualifying jobs were created or demonstrably in the process of being created.

Key Requirements During Project Distress:

1. Capital Deployment: Proof that the committed funds were transferred to the NCE and used for the intended business purpose, even if the business subsequently failed.
2. Job Creation: Evidence must show that the requisite 10 jobs were created based on the number of employees on the date USCIS adjudicates the I-829, or that the required number of jobs were established based on projections if the business is winding down.

If the project enters bankruptcy, the investor must meticulously document all financial transactions to prove the investment met the "at-risk" standard prior to the collapse.

Investor Recourse Options

If the project fails, the investor's primary objective shifts to preserving their immigration path, as the return of capital is often uncertain.

Scenario 1: Project Fails After I-829 Filing

If the I-829 is pending or approved, the investor's immigration status is generally secure, provided they can prove the initial investment criteria were met before the failure became absolute. The focus remains on documentation:

• Bank statements showing capital transfer.
• Contracts and invoices proving deployment.
• Payroll records demonstrating job creation.

Scenario 2: Project Fails Before I-829 Filing

If the project fails before the investor can file the I-829, the investor faces a significant challenge. They must demonstrate that the failure was due to legitimate business risk and not abandonment of the investment.

In such cases, the investor may need to:

• Invest additional capital into the same or a new qualifying enterprise (if time permits).
• Seek counsel immediately to document the extent of the loss and the steps taken to mitigate it.

The Role of the Regional Center

Regional Centers are responsible for overseeing the investment. If a Regional Center is implicated in mismanagement or fraud leading to the failure, the investor may have grounds to challenge the denial of their petition based on "extraordinary circumstances" or reliance on the Center's assurances.

However, if the failure is purely market-driven, the Regional Center’s liability is limited, as they cannot guarantee returns.

Conclusion

Project failure in the EB-5 context is a serious event that jeopardizes the investment principal. However, it does not automatically void the immigration petition, provided the investor can demonstrate that the capital was genuinely placed at risk and the job creation metrics were met prior to the insolvency. Due diligence before investing and immediate legal consultation upon signs of distress are the best defenses against losing both capital and the path to a Green Card.