More EB-5 investors allege fraud at Jupiter development

EB-5 developer Nick Mastroianni is facing another lawsuit from Chinese investors who poured money into the Harbourside Place project in Jupiter.

Plaintiffs Ting Peng and Lin Fu, both Chinese-born EB-5 investors who became limited partners in Harbourside Funding L.P., filed the lawsuit last month in West Palm Beach federal court against Nicholas Mastroianni II, Richard Yellen, Florida Regional Center LLC, and other Harbourside entities, alleging they perpetrated a fraudulent scheme.

The two investors are seeking class action status.

The lawsuit comes more than a year after nearly 80 other Chinese investors sued Mastroianni for allegedly defrauding them.

Reached for comment, Mastroianni suggested via email that The Real Deal research the prior suit, calling it a “sham lawsuit.” A hearing in that case that was scheduled for last month was canceled due to ongoing settlement negotiations, court records show.

Mastroianni is also chief executive of U.S. Immigration Fund, an EB-5 regional center in Jupiter.

Harbourside Place, a $170 million retail, restaurant and hotel project in Jupiter, was completed in December 2014. Mastroianni raised $99.5 million from 199 EB-5 investors, and closed on additional financing to build the mixed-use development.

The lawsuit alleges that Mastroianni and Yellen raised the EB-5 money to fund a construction loan that would have been repaid when it matured more than two years ago, but “had no intention of keeping their promise to repay.”

As the other plaintiffs alleged in the first suit, Peng and Fu allege Mastroianni intentionally structured the EB-5 investments so that he was one investor short for the $100 million, first-priority, secured construction loan in order to eventually control the new senior lender.

Harbourside Place “vehemently” denied the allegations.

According to the lawsuit, investors would get back 50 percent of their investments “immediately after receiving their permanent green card” and they would receive the full amount in the fourth year. The latest lawsuit alleges that Mastroianni advised the limited partners that the net operating income generated by the project wasn’t enough to pay interest payments, and requested that they consent to extend the maturity date to December 2020, from 2017, which the investors declined.

The Palm Beach Post first reported news of the second lawsuit.

Investor demand in the EB-5 program has waned due to visa backlogs and fraud and misuse.

Under new regulations put into effect last year, investment requirements rose.

Sen. Lindsey Graham of South Carolina and Sen. Chuck Schumer of New York are co-sponsoring a bill that would lower the minimum amount that foreign investors have to pour into some projects in order to receive a green card. It would also allow some investors to stay in the U.S. as they wait for their visas.

Mastroianni gave Graham a $5,000 campaign contribution in September, according to the Wall Street Journal, citing data from the Center for Responsive Politics.