Whether an EB-5 investor is returned their investment—upon either I-526E petition denial or EB-5 visa denial—will depend on the subscription agreement between the investor and the regional center. It also depends on the limitations set by the “at risk” requirement of the EB-5 program.
Many regional centers offer a return of the investment if an investor’s I-526E petition is denied, known as an I-526E refund guaranty. On some projects, EB5AN extends this refund guaranty to include the refunding of attorney’s fees and USCIS filing fees, which can be considerable, if the I-526E petition is denied.
In terms of the at-risk requirement of the EB-5 program, for funds to remain at risk, there must be a risk of loss and a chance for gain. Because of this, USCIS has designated certain agreements between EB-5 investors and regional centers as impermissible debt arrangements. While it is considered permissible for an EB-5 investor’s investment funds to be held in escrow until their I-526E petition is approved, an agreement between an investor and a new commercial enterprise (NCE) that guarantees the repayment of EB5 investment funds after I-526E approval and the granting of conditional permanent resident status is considered impermissible. If repayment is guaranteed, there is no risk of loss, which means the investment does not satisfy the at-risk requirement.
Because repayment cannot be guaranteed at later stages of the EB-5 process, investors should not expect repayment of their EB-5 investment funds on denial of the I-829 petition. However, if the NCE made a loan to the job-creating enterprise (JCE) and the loan comes due, the investor may be able to recover their investment if the JCE has the funds available to repay the loan to the NCE.
Finally, regional centers are unlikely to return capital if the investor’s EB-5 visa is denied due to inadmissibility. Inadmissibility can be based on being a public health risk, having a criminal record, and engaging in fraud or willful misrepresentation during the EB-5 visa application process.
Potential EB-5 investors should carefully review the subscription agreement before signing it and investing in a project. Conducting thorough due diligence is a crucial part of making an EB-5 investment.
