Securities litigation may be brought to recover for losses sustained in a wide variety of contexts, including losses sustained on stocks purchased on the stock markets, in circumstances where the investor purchased shares of stock based on fraudulent misstatements or omissions by a company and its management; losses on complex derivatives such as collateralized debt obligations (CDOs) and notes issued by structured investment vehicles (SIVs), in circumstances where the issuer of the security and the arranger or underwriter failed to adequately disclose the nature or risks of the underlying assets, or where the arranger had rigged the derivative instrument so that it was guaranteed to fail; and even losses sustained on agreements to participate in the profits in an oil and gas exploration project.

When an investor sustains losses on the same security as other investors, it may decide to pursue recovery as part of a class action. Alternatively, the investor may seek to “opt out” of the class action, and pursue recovery individually. As results of several studies have shown, an investor in an opt-out action frequently recovers more than an investor who is part of a class action. Frequently, the recovery by an opt-out plaintiff will be multiples of the amounts recovered by members of a class. If you have received notification of the filing of a class action, and you are uncertain as to your legal options, we will discuss your investments and losses, and assist you in deciding the best course to maximize your recovery.

One of the core practices of the firm is handling general commercial litigation matters on behalf of its clients, whether plaintiffs or defendants, in state and federal trial and appellate courts. Our commercial litigation clients include individual and institutional investors, public and private corporations, business entrepreneurs and consumers.  We serve the commercial litigation needs of both U.S. and overseas clients, including clients from China, Hong Kong and Australia.

We have represented and are currently representing clients in commercial litigation matters involving a wide variety of subjects, including contractual disputes arising from real estate investments and development projects; disputes in connection with energy investment projects such as oil and gas participation agreements and agreements to develop geothermal resources; claims involving professional malpractice against attorneys and auditors; investor claims against corporations, directors and officers, and brokerages for securities fraud and other violations of federal and state securities laws; and shareholder challenges to merger and acquisition transactions.

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One of the core practices of the firm is handling general commercial litigation matters on behalf of its clients, whether plaintiffs or defendants, in state and federal trial and appellate courts. Our commercial litigation clients include individual and institutional investors, public and private corporations, business entrepreneurs and consumers.  We serve the commercial litigation needs of both U.S. and overseas clients, including clients from China, Hong Kong and Australia.

We have represented and are currently representing clients in commercial litigation matters involving a wide variety of subjects, including contractual disputes arising from real estate investments and development projects; disputes in connection with energy investment projects such as oil and gas participation agreements and agreements to develop geothermal resources; claims involving professional malpractice against attorneys and auditors; investor claims against corporations, directors and officers, and brokerages for securities fraud and other violations of federal and state securities laws; and shareholder challenges to merger and acquisition transactions.

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Effective corporate governance procedures are a significant prophylactic means of protecting against breaches of fiduciary duty and other abuses by a company’s directors and officers. Accordingly, the firm assists its clients, whether institutions or individuals, to effect corporate governance changes at companies and in taking other steps to ensure the accountability of a company’s board of directors and senior management.

For example, the firm has experience in investigating and bringing litigation to challenge such matters as:

• executive compensation

• the adequacy of disclosure of executive perquisites

• related party transactions between a company and its officers

• corporate transactions that result in shareholder dilution and other harm to shareholders

• the nomination and appointment of directors

Corporate governance changes can be effected by bringing a derivative action on behalf of the company to assert breaches of fiduciary duty by the company’s board or officers, or as part of the settlement of a related securities litigation.

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Under the recently enacted Dodd-Frank legislation, certain incentives and protections are afforded to individuals who report to the SEC violations of the securities laws, such as accounting fraud, corporate fraud, insider trading, stock broker fraud, and other serious offenses. Specifically, the Dodd-Frank legislation provides that the SEC shall pay awards to eligible whistleblowers who voluntarily provide the SEC with original information that leads to a successful enforcement action yielding monetary sanctions of over $1 million. The amount awarded will range between 10 percent and 30 percent of the total monetary sanctions collected by the SEC. In addition, whistleblowers are protected by the Dodd-Frank legislation, which expressly prohibits retaliation by employers against whistleblowers and provides whistleblowers with a private cause of action in the event that they are discharged or discriminated against by their employers.

We have represented clients in various SEC whistleblower actions. Clients who choose the firm to represent them will receive expert guidance through the entire whistleblower process: the initial consultation with an experienced lawyer to discuss the client’s rights as a whistleblower and whether the client is entitled to receive an award from the SEC; the investigation of the whistleblower’s allegations; the presentation of the whistleblower’s claims to the SEC, including the completion of the necessary paperwork; attending any meetings with the SEC to discuss the whistleblower’s claims; protecting the whistleblower against retaliation during this process; and ensuring the whistleblower is entitled to a financial award from the SEC.

Because of our experience with the entire process, we will ensure that whistleblower claims are presented to the proper SEC office and personnel, so that claims receive priority attention and are handled expeditiously.

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What is the EB-5 Program?

The EB-5 Immigrant Investor Program (“EB-5 Program”) was created by Congress in 1992 to stimulate the U.S. economy through job creation and capital investment by foreign investors. The United States Citizenship and Immigration Services (“USCIS”) administers the program, which sets aside EB-5 immigrant visas for participants who invest in commercial enterprises approved by USCIS (sometimes administered by entities called “regional centers”). 

EB-5 foreign investors typically invest in a limited partnership or limited liability company, which is managed by a general partner or a manager/managing member.

A foreign investor is required to invest at least $800,00 (previously, $500,000), which must be at risk for the purpose of generating a return. The investor may then submit an I-526 petition for conditional permanent residency for a two-year period. If at least ten U.S. jobs are created as a result of the foreign investor’s investment, the investor may apply to have the conditions removed from her/his visa and live and work in the United States permanently (an I-829 petition).

What are the Risks of an EB-5 Investment?

The most common risks for EB-5 investors are (i) losing the $500,000 investment and (ii) not being able to attain permanent residency. In certain instances, the loss of investment or failure to secure residency is the result of mismanagement or misconduct by the entities and individuals running and managing the EB-5 investment vehicles.  

What Legal Options Are Available to EB-5 Investors Who Lose Their Investment?

Foreign investors who have lost their EB-5 investment or are concerned about their investment can pursue several different types of claims.

If the EB-5 investor suspects that their investment is threatened, the investor can demand to inspect the books and records of the EB-5 limited partnership or limited liability company. If the partnership or company does not comply with the demand, a lawsuit can be brought to obtain those books and records.

The mismanagement or misconduct in EB-5 investment vehicles typically involve one or more of the following:

• Charging investors unlawful fees or more fees than permitted by the applicable agreement.

• Diverting investors’ funds to family members, friends and other affiliates of the general partner or managing member. This unlawful diversion can be in the form of improper loans, or payments to the affiliates for purported services that were not provided.

• Use of the investors’ funds by the general partner/managing member in other projects organized by the general partner/managing member, without investors’ knowledge or consent.

• Failing to return the investment capital to investors at the end of the investment project. For example, where investors’ funds were invested in a real estate development loan, the general partner/managing member may repeatedly and improperly extend the term of the loan upon expiration of the loan.

• Failure of oversight by the general partner or managing member, leading to the loss of the EB-5 investment.

Who Can EB-5 Investors Sue?

Depending on the nature of the case, EB-5 investors can bring claims against defendants such as the following:

• The EB-5 limited partnership or limited liability company.

• The general partner of the EB-5 limited partnership, or the manager of the EB-5 limited liability company.

• The regional center administering the EB-5 investment vehicle.

• Any other individuals or entities who directly or indirectly control the EB-5 limited partnership or limited liability company.

• Any persons or entities who received funds unlawfully diverted from the EB-5 company/partnership.

Once the EB-5 investor is aware of any mismanagement or misconduct, the investor can commence a lawsuit on their own behalf, on behalf of the limited partnership or limited liability company, or as a class action.

EB-5 Lawsuits Brought by HGT Law:

HGT Law has represented and is currently representing EB-5 investors in several lawsuits against regional centers, the EB-5 limited partnerships or limited liability companies, and the general partners and managers of the partnerships and companies, including the following:

• In Tang v. American Everglow Regional Center, LLC, et al., (Cal. Superior Court), HGT Law commenced a derivative lawsuit on behalf of an EB-5 limited partnership against: the general partners – American Everglow Regional Center, LLC and Legend Investment Management LLC;  the managing members of the general partners – Hua Guo and Steven Zhi Qin; and an affiliated entity – Glory Investment International Inc. Plaintiff seeks to recover unauthorized fees and expenses that the general partners paid to themselves. See Complaint.

• In Ningxi Xu v. Civitas West Village Fund GP, LP, et al., (U.S District Court, N.D. Tex.), HGT Law commenced a derivative lawsuit against the general partner and manager of the Civitas Partnership (established under the EB-5 Program) for improperly charging EB-5 investors “market” and “consulting” fees. See Complaint.

• In Beach Orangethorpe Hotel, LLC, et al., (Cal. Superior Court), HGT Law commenced a derivative lawsuit against Evertrust Bank, M&D Regional Center LLC and M+D Properties to recover Eb-5 investors’ loan in connection with the development of a hotel, which investment was made under the federal EB-5 Program. See Complaint.

• In Kin Chung Ng. vs. Pearl Street Investors Fund, L.P., et al., No. 652648/2022 (N.Y. Supreme Court), HGT Law commenced a books and records lawsuit to obtain records of the EB-5 limited partnership for the purpose of investigating corporate malfeasance and potential claims against the general partner Lam NYC EB-5 Fund Regional Center LLC. There were potential claims for breaches of fiduciary duty and fraud, in connection with improper extensions on loans made by the partnership and failure to make distributions to the limited partners. See Complaint.

•  In Pan Wang v. 76 Eleventh Funding GP, LLC, HGT Law is conducting an arbitration on behalf of an individual investor against the manager 76 Eleventh Funding GP, LLC of an EB-5 limited liability company 76 Eleventh Funding LLC, which was formed for the purpose of making a junior mezzanine construction loan to fund a mixed commercial and residential development located in New York, New York. The loan is now in default, resulting in the loss of all investors’ funds. The investor is seeking to compel the manager to disclose to all investors information relating to the settlement of various potential claims of the company, and to allow investors to be consulted concerning any proposed settlement. See Complaint.

For more information about EB-5 litigation, please contact us at (646) 453-7288 or via email at info@hgtlaw.com. HGT Law offers alternative fee arrangements to our standard hourly fee arrangement.

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