Queens developer Richard Xia and his companies have settled with the Securities and Exchange Commission for $272 million over allegations he defrauded Chinese EB-5 investors.
The SEC alleged Xia and his firm, Fleet Financial, misled EB-5 investors between 2010 and 2017 to obtain over $228 million in financing from over 400 investors for two projects. One of those projects was a posh hotel and condo development in Corona, Queens.
The project stood out from the neighborhood near LaGuardia Airport by boasting a Zaha Hadid-inspired design, a restaurant led by a former sushi chef of a Michelin star restaurant, and a performing arts center.
The SEC alleges Xia misled investors about the sources of financing, the experience of the development and construction team, and the scope of the project.
The regulator further alleged Xia diverted $30 million of investor money to purchase two homes in Great Neck and a third in Sands Point, Long Island. Xia claimed the Sands Point home was used as a dumping ground for contaminated soil from another real estate project.
“And here, this is a perfect dumping site because of the big different elevations here,” said Xia in a deposition, according to Crain’s. “If you just level them, the property value could increase and … the soil can be reused.”
The purported dumping ground: A 12-room house with an indoor swimming pool and a tennis court sitting over two waterfront acres in front of the Long Island Sound.
EB-5 is a federal program that allows foreign investors the ability to obtain a U.S. visa in exchange for at least $500,000. Real estate developers flocked to the program in the 2010s to seek international financing for construction, but interest has waned in recent years. The program has been plagued with fraud, including misrepresentations by developers to foreign investors.
As part of the settlement, Xia will be forced to hand over the $228 million he took from the EB-5 investors along with $25 million in pre-judgment interest. Xia will also pay a civil penalty of $3.1 million. Fleet Financial will pay a civil penalty of $15.5 million.
Xia is permanently barred from participating in future securities offerings, except for trading for his own account or raising money from people who are accredited investors. Fleet Financial has been banned from participating in any future securities offering.
Xia’s attorney did not immediately return a request for comment.
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