Like Elsa, the Princess in Disney’s classic Frozen, once again the Securities and Exchange Commission (SEC) has utilized its power to freeze. In this case, the freezing of assets. In what has become an increasingly common tactic, the SEC successfully sought to freeze assets of several individuals and corporate entities in a complaint it recently brought alleging fraud in connection with securities offerings for projects under the EB-5 immigration program. As we have reported previously, particularly in the EB-5 space, the SEC has in recent years utilized the asset freeze as an enforcement tool. The EB-5 program allows foreign investors to apply for green cards in exchange for a minimum $500,000 investment in a job-creating enterprise.
In its case against Edward and Jean Chen, both residents of Arcadia, California, the SEC alleged that the Chens engaged in a “staggering” misappropriation of investor funds – diverting to themselves at least $8.6 million of the $9.5 million they raised from investors in one project, and another $3.5 million of investor funds from a second project.
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