Full Webinar: Cryptocurrency Source of Funds Considerations for EB-5 Investors
Sam:
Hi, everyone. This is Sam Silverman, managing partner of EB5AN. Thank you for joining today’s webinar. Today we’re going to be discussing cryptocurrency source of funds considerations for EB-5 investors. This is a really important topic now that crypto is becoming much more mainstream and is now a much more common source of funds for EB-5 investors to fund their EB-5 investment. So today we’re going to discuss a little bit about EB5AN, we’ll introduce our guest panelist, we’ll talk about cryptocurrencies specifically, and then we’ll touch on a few different urban and rural TEA projects.
All right, a little about EB5AN. We’re a leading EB-5 investment fund manager. We’ve worked on many, many projects around the United States. We cover the entire continental United States. One of the things that sets us apart from many of the other EB-5 regional center operators is our commitment to investment transparency. We’re the only large regional center operator that shares all the financial statements related to the project and any separate entity that’s guaranteeing the repayment of EB-5 investment funds. We’ve also published hundreds of articles and YouTube videos to help EB-5 investors identify key diligence items and red flags when considering potential EB-5 investments.
As I mentioned earlier, I’m Sam Silverman, one of the two managing partners. A little bit more about my background and experience is there on the left side of the screen. And then my partner, Mike Schoenfeld, there on the right side.
This is a map showing many of our regional centers that cover the United States. And we’ve worked with over 2,000 investors from more than 60 different countries all around the world and have been featured in many of the leading publications in the U.S.
So about our guest panelist, it’s my pleasure to introduce Anahita George, a top EB-5 immigration attorney who’s worked with hundreds of EB-5 investors from India, from Europe, from around the world, and we’re pleased to have her with us today. And I’ll let her jump in and introduce herself, share a little bit about her background and bio. And then we’ll jump into the main topic today and discuss how crypto can be used for source of funds but it has to be done carefully.
Anahita:
Thank you, Sam. Thanks for having me on today. Hi, everyone. My name is Anahita George. I’m a partner at George & Marzialo. It’s a law firm based out of Seattle. We exclusively specialize in EB-5. We’ve done over 1,800 applications at this point, and we have a 100% success rate in EB-5 source of funds. As background, I was a forensic accountant at work for a couple of Big Four accounting firms, so I have an extensive forensic accounting background, which helps us make your EB-5 case a 100% success.
As I said, we’ve been doing EB-5 since 2014, and we’re one of the very few firms that only represents the investor. We never do any work related to regional centers. We never file 956F petitions, and we never represent a regional center ever—which means that there’s a clear delineation. Our loyalties lie to our clients. We do not represent regional centers or recommend them. We are very open and honest and transparent in our dealings with our clients. So our only allegiance is to our investors.
Sam:
Could you talk a little bit about your experience specifically with India? And I know a good deal of the clients that you work with are Indian or from India or are bringing funds from India, so can you touch on that a little bit too?
Anahita:
Sure. So at least right now, Sam, I would say 90% of the filings are from the U.S., whether those are investors on H-1B, E-2, L-1s, F1-s. There’s a 10% quota that’s coming from abroad from India. The reason Indian filings have dropped is because of the 20% outbound wire.
And I also think that there’s not a lot of awareness within the Indian industry about how source of funds is done. So for example, the biggest roadblock people think they have is the $250,000 annual remittance limitation from India. This is true—there is a $250,000 limitation—but what is also true is that that limitation is per person, which means you could use your friend’s limit, you could use your grandparent’s limit, your uncle’s limit, your aunt’s limit, your spouse’s limit, and that very easily gets you over the $800,000 mark.
With India, the hardest thing we’ve seen is to show legitimate documentation of funding. The good news is the Reserve Bank of India makes sure that the banking records and the tax records are preserved for over 10 years. So as time has gone by and regs have developed and the financial system’s getting stronger, we’ve had more success getting documentation from clients.
Where we struggle is in India, people tend to pay lower taxes. They don’t tend to disclose all their income, and that’s where we have to come in and figure out a way to say, “Hey, if you owe any back taxes, let’s fix that issue. Let’s make sure that your income levels are actually what they are before we file the application.” Because historically, if you had $100,000 income and were making $800,000 investments, you would get questioned at the Mumbai Embassy about how is it that you’ve made this investment.
So I do think that we invest a lot of time upfront in evaluating the client’s bank statements, their tax returns, their Form 16s, which are W-2 equivalent in the U.S., their business statements, just to look for anomalies like “Hey, is there a spike in the business income? Are you showing more income this year than last year?” These are all legitimate questions that an experienced adjudicator tends to ask.
We do not have as much regulatory red tape anymore, like I said, because we’re able to bypass that through using multiple people, and the regulations are pretty good. So the banks have gotten a handle of what EB-5 is, what remittance requirements are, how to pull all the funds for the benefit of one investor. All of that has been figured out but really requires the clients to work with an experienced lawyer.
And the last thing I’ll say is we’ve seen, in practice, a lot of attorneys green-light funds to be remitted to the regional centers. Our stance is that that’s the last thing you do. The first thing you do is document the entire source of funds, go through all the financial documents, and once that 3,000- to 5,000-page file is ready, that’s when you should be hitting the remit button, and then you get investment confirmation from the regional center, sign subscription documents, and you’re ready to ship. So the process should be evaluate the documents, arrange the source of funds, invest, and immediately print and ship.
Sam:
Perfect. Thank you. Thank you for expounding on that. So let’s jump into the main topic today: cryptocurrency and how it fits in with source of funds. So let’s start with kind of a general overview. What is crypto, and how does the money move around? And then we’ll get into some of the more nuanced details of what investors who want to use part of their crypto portfolio to fund their investment need to be looking for.
Anahita:
Right. We are seeing more and more of these cryptocurrency transactions pop up in our consultations, and I do believe that the industry does not understand what USCIS is looking for. So let’s take a step back and talk about what cryptocurrency is.
These are digital currencies that are traded on platforms like Coinbase, Circle. There are different kinds of coins. The oldest one and the most popular one that we see in practice is Bitcoin, followed by Ethereum, and then followed by Litecoin. These are the three coins that we see clients come to us and say, “Hey, I have significant gains in Bitcoin and Ethereum, and I would like to liquidate that for EB-5 purposes.”
Again, our general answer is “It all works if you are able to document the source of funds.” And what do I mean by document source of funds? Are you able to establish that these coins were purchased using legal tender, legal money, part of your compensation, right? So again, we don’t say a blanket “No, let’s not do digital or virtual currency,” but we say that the threshold that the USCIS is using to adjudicate these is a lot higher than say your RSUs or your cash or your CBs that have been funded through your W-2 income.
Sam, do you want me to talk about how we go about evaluating whether a cryptocurrency can be used or not?
Sam:
Yep, yep. Let’s do that and then talk about that in the context of just what the best practices look like when you’re considering using crypto and just, before you even go down that path, what are you going to need to be able to prove before you decide definitely to use that source.
Anahita:
Yes. So I will start off with our interactions with crypto started about 18 months ago when USCIS started issuing these 10-, 15-page requests for evidences. These were through other law firms, and what the RFE does is gives us a good roadmap of what the USCIS is expecting in terms of documentation when they’re looking at these crypto transactions. So we use those requests for evidences as a roadmap of what needs to be documented.
I want to start very high level with what is required, just step number one, take a step back. The first question we ask a client is “When did you purchase this cryptocurrency?” Why is that important? That is important because way back in time, prior to 2016, cryptocurrency exchanges like Coinbase, Circle, Kraken were not licensed. So the department of financial institutions in every state licenses these exchanges as money transmitters. If these exchanges are not licensed, they’re considered to be not lawfully operating in the state.
For example, Coinbase back in 2014 was not licensed in the state of Arizona. So if you go on to their department of financial institution’s website, you’re going to be able to see when Coinbase was granted the money transmitter license by the state of Arizona. If that license was, say, granted in 2016 and your crypto purchases were made in 2014, the government alleges that that brokerage itself was not legal to operate. So that entire transaction is now tainted, and you are unable to use those funds for EB-5 investment.
So step number one is identify which state you were residing in when you made that purchase, identify if the exchange that you’re working on was registered as a money transmitter by the local department of financial institutions. And if that is the case, you can then move on to step two, which is analyzing the source of funds of the crypto.
Any questions on that, Sam?
Sam:
No, I think that makes sense. I know we’ve seen some RFEs with that type of questioning come from USCIS.
Anahita:
Right. So when we are documenting source of funds, step number one for us is, whether in the state of Washington or Oregon or California, we go about and we print the license for Coinbase or Kraken or any of these exchanges and say, “Hey, government, here’s evidence from the DFI’s website that this brokerage or this exchange was licensed at the time of the purchase.” That is step number one.
Step number two is documenting the purchase of the crypto itself. The clearest way to document that is to show your banking records to show accumulation of wealth in those banking records, transfer to the brokerage account, and purchase of the digital currency. That is as clean as it gets, is showing accumulation of wealth, transferring into your brokerage account and then purchase the cryptocurrency.
Now, what we tend to see is people that have purchased crypto prior to 2016 or prior to 2017 are not going to have banking records available. And the reason for that is the anti–money laundering laws in the United States only require banks to retain records for seven years. So if you were to do a filing today, you would not be able to access bank statements prior to October 2017. So if you’ve made purchases prior to October 2017, you’re going to have to be very convincing through secondary evidences, such as W-2s, tax returns, employment confirmation letters, to prove to the government that you had enough income to make this legal purchase.
The same applies to the flip side of the transaction. If you were making these purchases on Coinbase, Coinbase, because of AML regulations, is not going to be able to provide statements that are older than October 2017, which means, again, you are relying on an affidavit. You are relying on secondary evidence to convince the government that these coins were purchased using legal income.
Usually, USCIS accepts that as a good source. In crypto, though, their threshold is much higher. We’ve seen a lot of pushback. What they want to see is they want to see wallet addresses. What do I mean by that? They want to see address to show that that purchase was made at that point in time. Anything that you can do to substantiate that this is indeed old coin. So this is step number two. Am I able to document the source of fund?
As of today, what we tell the client is that if it falls outside document retention period, let’s not use crypto. Because if the pushback comes over and over again and they’re not willing to believe you, then it’s going to have to be adjudicated, say, with the board of appeals, and it’s going to go through one of the appeals processes. Luckily, the trend has been that crypto became more mainstream post-2017. So most of the transactions that we’re seeing with our clients, they are able to document the source of funds. And again, going back to if you made this purchase in ’14 or ’15, you may just fail out on step one, that the exchange was not licensed in this stage. So again, step one, make sure that the exchange was licensed when you made the purchase. Step two, make sure you’re able to document the source of funds of the purchase of that crypto.
Any questions, Sam? Anything you’d like me to add?
Sam:
No, I think that’s pretty comprehensive. Let’s go into some of these compliance issues with respect to taxes and then just also the transferring of different coins across wallets. What issues do we need to be aware of there?
Anahita:
That’s a great question. So during the Sam Bankman-Fried fraud case, a lot of crypto exchanges went down back in 2021 and 2022. And what ended up happening is exchanges like Circle or Kraken that went out of business, clients had to then transfer their coins from those exchanges into Coinbase, which is now the most mainstream crypto exchange that’s available.
What we’ve seen with the USCIS is they want us to give these DFI ledger addresses, an entire history of the coin, and show to them how these coins moved about. Where we have hit a wall is that if Kraken doesn’t exist and Circle doesn’t exist, we do not have statements to substantiate that these coins actually went through the path of purchase transfer into Coinbase. So the biggest hurdle we’re now facing is all these exchanges that went down, we have a gap of visibility. And in that gap, USCIS can make any assumptions as they want about the purchase of the crypto.
So I believe that if you invested in a crypto that went down, and if you do not have access to those statements or you do not have access to the ledger that shows that those statements were in fact held in that wallet, again, the crypto source does not work out for you. So it’s extremely important that you have a proper accounting of how the money moved. And if you do not have that, then we do not recommend using crypto at all in your transaction. Use of reputable exchanges is extremely important, and again, this can be fixed going forward, not looking back. So if you were involved in any of these cryptos that have gone down and you’re unable to acquire the records for those, you are relying on secondary evidence and you’re letting USCIS fill the gaps. USCIS’s understanding of crypto is that this is terrorism money or it’s illegitimate money. They’re very skeptical of the source. So the line needs to be very clear.
The concept of maintenance of wealth applies throughout EB-5. What do I mean by that? If the coin was purchased in 2017 and you haven’t done anything with it, you’ve just held that coin in your Coinbase account from 2017 to 2023, they want to see all your statements from 2017 to 2023, evidence in that the coin was just sitting there and that you weren’t doing anything with it. If, however, you were moving those coins across wallets, they want to see the ledger, they want to see proof of the ledger, they want to see the exchange statements, the wallet statements showing that the Bitcoin was transferred. And again, we hit a wall with “Hey, are these exchanges even licensed where you’re moving the money?”
So again, this is more detail than the actual source of funds because the threshold is a lot higher. And the decentralization really adds complexity. One of the RFEs that we came across, Sam, actually had USCIS looking up the addresses for the ledger and saying, “We’re unable to access these ledgers, and because of that, we don’t think that what you’re telling us is true.” So again, go back and see if you can pull out the address and then the ledger description and then submit that to USCIS.
The other complication is the tax law compliance. Very few exchanges are actually issuing 1099s that are then being registered with the IRS to show that. If you’ve exercised any capital gains, if you received any capital gains in sales of crypto, you were personally responsible up until a couple of years ago to report that to the IRS because no 1099s were being printed. If you didn’t pay those taxes, you could still use crypto as a source, but you would have to amend your tax return and pay those back taxes. That would come with penalties. And crypto is treated just like any other security. There’s long-term capital gains, there are short-term capital gains, but all of that is self-reporting. You are not exempt from capital gain taxes because you’re using crypto. And if Coinbase or if Kraken or if Circle did not issue you a 1099, that does not exempt you from paying taxes. So it’s extremely important that you have paid taxes on these gains from the liquidation of crypto.
One final point I’ll say is the conversion of coins. A lot of the times we see USDC coins being converted into Bitcoin or Ethereum being converted into Litecoin or Litecoin being converted into Bitcoin or these exchanges awarding coins because you’re taking surveys. Government does not like any of that. If your statements do not very clearly show that you purchased the Litecoin and now you’re converting the Litecoin into Bitcoin, you’re going to have trouble getting that source of funds approved.
So again, have your attorney and yourself go through all these statements. Make sure you understand the nature of the transaction. Is this conversion? Is this pure purchase? Have I maintained these coins in my account? If I haven’t maintained these coins, the exchanges through which I transferred the coins, are those statements available? Do I have access to the ledger? Can I print the ledger? Can I supplement the ledger? Have I paid taxes on the gains? All of these questions need to be answered before you say yes to crypto as a source of funds.
Sam:
Got it. Okay. That’s really, really helpful. All right, I think that pretty much covers the conversation for today. I think maybe to wrap up, could you share a little bit about what the process looks like for potential investors who want to work with you and how you interact with them, upload documents, how long the process typically takes? How does everything work?
Anahita:
Sure, sure. So we’re easily reachable through our scheduler. That is available through this QR code. We offer one free 30-minute consultation to our clients. Typically, we’re engaging with clients that are ready to go in 30 to 60 days. As you all know, this is the busiest time in the EB-5 industry. So we’re at this rate working with five clients a week. And our entire process relies heavily on technology like WhatsApp, like Dropbox. What we do not do is send out multiple emails to our clients, wait for the client to respond, and then we respond back and forth. A lot of this conversation happens in real time over WhatsApp, over phone calls. We’re very easily available to our clients.
We give the clients access to Dropbox. They upload all the documents that we’re requesting. We give them a one-shot list of the source of funds documentation once we understand what it is that their source of funds is, and then they start uploading these documents through Dropbox.
Another step is filling out the immigration forms. This is a very important piece, and why this is important is H-1B investors or F-1 clients that are in the U.S. that are investing in EB-5 need to make sure that what they’re telling us on the immigration forms is consistent with what they’ve told the embassy in the past or what they’ve said on their H-1B visa applications or L-1. Any discrepancy between the past applications and the current application only delays your process or enables USCIS to tag you with misrepresentation fraud. So in these steps of, hey, you’re uploading source of funds documents.
You’re also conversing with us on, hey, project-related subscription documents. You’re also talking to us on the immigration forms or answering questions about what you’ve said in the past, if what you’re saying now is consistent, and in the meantime also arranging your money, pooling it in one bank account, being ready to transfer it to the project.
I’d say the entire process end to end takes about three weeks. The most time-consuming process for any investor is gathering the source of funds documents, because what we do as best practice is just have a client download seven years of their banking records, their tax records, seven years of their W-2s, their brokerage statements, and all of that requires you to individually go into these accounts and download one statement at a time. And then we process all those documents and tell a very comprehensive story to USCIS.
Sam and I—I think have worked together for over eight years now, and then we did a lot of files for Twin Lakes, and we are seeing no-pushback approvals in record time because of the comprehensive nature of the work that we’ve done on the upfront.
I think there’s one thing that I would like to tell the clients, is that we’ve seen in the industry, we’ve seen a practice of billing the client twice. There are attorneys that bill the client on the front end to do the source of funds and to do the first set of filing, and then there are attorneys that also go on the back end when there’s an RFE. Our policy at George & Marzialo is to make sure you don’t get an RFE, because that is a failure. We’ve missed something if you get an RFE. General RFEs like loss of documents by USCIS is understandable, but we never see an RFE where the government has said, “Well, you did not provide us with substantial documentation to substantiate the source of funds.”
For this reason, we never charge for RFEs. We never charge for requests for evidence because we do believe it is our job to do our job right the first time and not bill a client twice because of our incompetence.
So we’re very sure of our work. We do a lot of heavy lifting upfront, and the files we submit are close to perfect, and that is evident by close to 80 approvals that we’ve received in Twin Lakes at this point. We’re very, very communicative. What I would tell the clients is if you’re ready to file in the next 30 to 60 days, please reach out to us. We’ll be happy to get you filed in three weeks.
Sam:
Thanks, Anahita. I think one just general point to make is that all immigration attorneys are not created equal. You’ve got to make sure you find someone that’s responsible, that’s responsive, is getting back to you quickly, and is going to be there to support you over this multi-year journey. This is not just a one-time thing and then you file and never forget about it. There’s constant… There’s follow-up. There’s things… Missing the medical exam can be a problem, can be very problematic. So you’ve got to make sure that you’re working with someone who’s doing this day in, day out, has seen all the weird scenarios pop up, and is going to be able to guide you to make sure you don’t have any delays.
Anahita:
Yeah, absolutely. And the one last point, Sam, that I think you also emphasize on regularly in your transparency webinars is it is very important for the client to ask their attorney if they’re representing any regional center, whether am I doing the documentation for any of the regional center, because that kind of creates a conflict of interest. If I am also representing the regional center, doing their project docs, and then, on the other side of the transaction, servicing source of funds, there is a conflict of interest, and my duty then lies towards the regional center because that is my first client rather than the EB-5 investor. So I always go back, and when the clients are asking me questions, I always volunteer and say, “We at George & Marzialo will never and have never represented a regional center,” just to keep our duties and our allegiance very clear to the EB-5 investor.”
Sam:
Exactly. It’s really important to avoid conflicts of interest, whether it’s from the regional center or between the developer. Just having all parties be independent is going to really reduce potential financial risk for an investment.
So EB5AN is independent. We work with many, many attorneys. Anahita is one of the more popular attorneys that we work with. But for investors who want to join any one of our projects, they’re free to use any attorney. There’s no restrictions whatsoever.
And with that, thank you, Anahita, for taking the time today. And yeah, any questions related to source of funds, please reach out to Anahita. Her details are there on the screen. And any questions related to any projects, whether they’re rural or urban, please feel free to schedule a call with our team.
Anahita:
Thank you.
