July 27, 2026  ·  Complaint filed July 22, 2026  ·  cacd, No. 2:26-cv-08052

Newman News, By David Brunk

Read the filing

Xia v. Chen Alleges $94.9M EB-5 Scheme to Wipe Out Investors’ Green Cards and Capital

Project Costs and Financing Allegedly Misrepresented

A group of 38 Chinese investors has sued Vincent Chen, Grant W. King, Scott Barrack, and 16 affiliated entities in the U.S. District Court for the Central District of California, alleging a decade-long scheme to defraud them of $94.9 million through the EB-5 Immigrant Investor Program. The complaint, filed July 22, 2026, claims Defendants represented the total cost of the "Hollywood Starlight World" project as $96 million (Compl. ¶53), a figure that included a $52 million shareholder equity portion purportedly contributed by Defendant Chen (Compl. ¶53). However, the complaint alleges that this representation was part of a broader pattern of misrepresentation regarding the project's financing and capital structure, including Defendant Chen’s purported equity contribution of $52,000,000 (Compl. ¶53). The complaint further alleges that Defendants misrepresented the required equity investment under the EB-5 Program, which was stated as "$500,000" in the offering materials: "the required equity investment is $500,000" (Compl. ¶37).

The complaint details how Defendants allegedly broke down the $96 million project cost in their offering materials:

• $52 million: Represented as shareholder equity, with Defendant Chen’s purported equity contribution accounting for this amount (Compl. ¶53).
• $24 million: Represented as bank financing (Compl. ¶53).
• $20 million: Represented as the EB-5 investor raise portion (Compl. ¶53).

The complaint alleges that these figures were materially misleading. For example, the $20 million EB-5 investor raise was allegedly inflated, as the actual total raised from 171 Chinese investors was $94.9 million (Compl. ¶53). Additionally, the complaint alleges that the $24 million bank financing was never secured on the terms represented to investors. The complaint further alleges that Defendants misrepresented the use of investor capital, including the diversion of $5,000,000 from Dream Lender LP’s capital to pay down a senior loan, as outlined in the Phase V PPM (Compl. ¶48). The complaint also details the administrative fees charged to investors, which were not disclosed as part of the project’s financing structure. Selma LP Plaintiffs were charged an administrative fee of $45,000 for their subscriptions, while Dream Lender LP Plaintiffs were charged $55,000 (Compl. ¶48). These fees were allegedly used to further enrich Defendants while misrepresenting the true cost of the project to investors.

The complaint further alleges that Defendants misrepresented the contributions of the limited partnerships to the project. The Phase V Private Placement Memorandum (PPM) for Dream Lender LP represented that Selma LP would contribute $48 million to the project (Compl. ¶48). However, the complaint alleges that this figure was part of the broader misrepresentation of the project's financial health and capital structure. Similarly, the Phase I PPM represented that Selma LP would invest $36,000,000 in 6417 Hotel LLC (Compl. ¶47), a figure that the complaint alleges was never realized. The complaint also details the target raise for Dream Lender LP, which was $44,000,000 (88 units × $500,000) as represented in the Phase V PPM (Compl. ¶48). However, the complaint alleges that this target was part of the broader scheme to mislead investors about the project's financial health and the use of their capital, including the diversion of funds to pay down the senior loan and the payment of administrative fees.

Two Limited Partnerships, One Alleged Scheme

A group of 38 Chinese investors has sued Vincent Chen, Grant W. King, Scott Barrack, and 16 affiliated entities in the U.S. District Court for the Central District of California, alleging a decade-long scheme to defraud them of $94.9 million through the EB-5 Immigrant Investor Program. The complaint, filed July 22, 2026, claims Defendants misrepresented the financial health of the "Hollywood Starlight World" project, concealed conflicts of interest, and used a $33 million fraudulent loan (high-risk senior loan) (Compl. ¶81) to subordinate Plaintiffs’ equity positions.

Plaintiffs, all EB-5 participants, invested $500,000 each—plus administrative fees—in two limited partnerships, Selma LP and Dream Lender LP, which were marketed as financing phases of a mixed-use development at 6417 Selma Avenue in Los Angeles. The complaint alleges that the required equity investment under the EB-5 Program was $500,000, as stated in the offering materials: "the required equity investment is $500,000" (Compl. ¶37). However, in addition to this minimum investment, Plaintiffs were charged administrative fees of $45,000 for Selma LP subscriptions and $55,000 for Dream Lender LP subscriptions (Compl. ¶48).

The complaint claims Defendants represented the total project cost as $96 million, with $52 million allocated to shareholder equity, $24 million to bank financing, and $20 million to the EB-5 investor raise (Compl. ¶53). However, the complaint alleges that these figures were materially misleading, as the actual total raised from investors was $94.9 million. The complaint further alleges that Defendants misrepresented the use of investor capital, including the diversion of $5,000,000 from Dream Lender LP’s capital to pay down a senior loan (Compl. ¶48).

The complaint divides Plaintiffs into two subgroups based on their investment vehicles:

• Selma LP Plaintiffs (26 individuals): Invested in "Phase I – Dream Hotel" via Selma LP, a Delaware limited partnership. The earliest subscription agreement was signed August 2, 2013, and the latest on July 23, 2015. Plaintiffs provided capital between September 12, 2013, and July 28, 2015, under the belief that Selma LP would make an equity investment in 6417 Hotel LLC, secured by collateral. The Phase I PPM represented that Selma LP would invest $36,000,000 in 6417 Hotel LLC (Compl. ¶47). Each Selma LP Plaintiff was charged an administrative fee of $45,000 for their subscription (Compl. ¶48). The complaint alleges that these fees were part of the broader scheme to mislead investors about the true cost of the project and the use of their capital.
• Dream Lender LP Plaintiffs (18 individuals): Invested in "Phase V – Tao Restaurant" via Dream Lender LP, a California limited partnership. The earliest subscription agreement was signed October 21, 2016, and the latest on July 31, 2017. Plaintiffs provided capital between August 17, 2017, and November 10, 2017, under the belief that Dream Lender LP would make a loan to 6417 Hotel LLC, secured by a second-priority lien on the hotel’s real property and a pledge of distribution rights from its subsidiaries. The Phase V PPM represented that Selma LP would contribute $48 million to the project (Compl. ¶48) and that the target raise for Dream Lender LP was $44,000,000 (88 units × $500,000) (Compl. ¶48). Each Dream Lender LP Plaintiff was charged an administrative fee of $55,000 for their subscription (Compl. ¶48). The complaint further alleges that the first portion of Dream Lender LP’s capital, totaling $5,000,000, was used to pay down the senior loan (Compl. ¶48). The complaint states that this diversion of funds was concealed from Plaintiffs, who were led to believe their capital would be used to fund the Project and secure their equity positions.

The partnerships were structured to comply with the EB-5 Program, with the purported goal of creating jobs and securing Plaintiffs’ path to U.S. permanent residency. Instead, Defendants allegedly used the partnerships as conduits to funnel capital into a web of controlled entities, including 6417 Hotel LLC, 6417 Holdings LLC, 6421 Selma Restaurant LLC, and 1601 Cahuenga Nightclub LLC, all of which the complaint claims were alter egos of Chen and King. The complaint alleges that these entities were used to mislead investors about the project's financial health and to divert funds for the benefit of Defendants. The complaint specifically alleges that Defendants concealed the true nature of the project's financing, including the $72 million rescue loan acquired by RG in 2021 and the $8 million loan to a Related Project, which was lost (Compl. ¶74).

Private Placement Memoranda Allegedly Misrepresented Project’s Financial Health and Corporate Structure

The complaint alleges that Defendants disseminated Private Placement Memoranda (PPMs) and partnership agreements that contained materially false and misleading statements about the Project’s financial health, corporate structure, and USCIS accreditation. Among the alleged misrepresentations:

• USCIS Approval: Defendants represented that the Hollywood International Regional Center (HIRC), a USCIS-accredited regional center, was actively sponsoring the Project. In reality, USCIS terminated HIRC’s sponsorship on January 30, 2025, due to non-payment of fees—a fact Defendants allegedly concealed from Plaintiffs until September 2025. The complaint alleges that this concealment was part of a broader pattern of fraud, including the misrepresentation of the project's financial health and the diversion of investor funds.
• Corporate Structure: Defendants represented that the Project was independent and professionally managed, but the complaint alleges that Chen, King, and Barrack controlled every aspect of the enterprise, including the migration agencies that funneled investors from the PRC. The complaint states, "VCG... provided the investor pipeline from which Defendants obtained victims for the Scheme" (Compl. ¶26). The complaint further alleges that Defendants misrepresented the corporate structure by failing to disclose the overlapping control of entities such as HIRC, RG, and the limited partnerships, which were all controlled by Chen and King. The complaint alleges that this misrepresentation included the concealment of the $52,000,000 equity contribution and the $33 million fraudulent loan (high-risk senior loan).
• Colony NorthStar’s Involvement: Defendants touted a minority equity investment from Colony NorthStar, Inc. (now DigitalBridge Group, Inc.), a NYSE-traded corporation, to add prestige to the Project. The complaint alleges that this involvement was used to further the scheme by adding a veneer of legitimacy, while in reality, the investment was minimal and did not provide the financial stability represented to investors. The complaint states that this misrepresentation was part of the broader pattern of fraud, which included the concealment of the $72 million rescue loan and the $8 million loan to the Related Project.
• Chen’s Role: Defendants represented that Chen was merely an equity investor, but the complaint alleges he was the de facto controller of the entire enterprise, including a migration agency described as the "investor pipeline from which Defendants obtained victims for the Scheme." The complaint further alleges that Chen made an $8 million loan to a Related Project, which was lost, serving as a blueprint for the scheme (Compl. ¶74). The complaint also alleges that Chen’s purported equity contribution of $52,000,000 was part of the misrepresentation of the project’s financial health (Compl. ¶53). The complaint states, "Defendant Chen’s $8 million loan to the Related Project was lost, serving as a blueprint for the broader scheme to defraud Plaintiffs" (Compl. ¶74).
• Use of Funds: Defendants represented that Plaintiffs’ capital would be used to fund the Project, but the complaint alleges that funds were commingled and diverted. For example, a $6.5 million "development fee" was paid to Relevant Group LLC (RG), another entity controlled by Chen and King. Additionally, the complaint alleges that Defendant RG acquired a $72 million rescue loan in 2021, which was part of the broader scheme to mislead investors about the project's financial health (Compl. ¶75). The complaint further alleges that Defendants diverted $5,000,000 from Dream Lender LP’s capital to pay down the senior loan, contrary to the representations made in the Phase V PPM (Compl. ¶48). The complaint states, "Defendants misused Plaintiffs’ capital by diverting $5,000,000 from Dream Lender LP’s funds to pay down the senior loan, while representing that the funds would be used to finance the Project" (Compl. ¶116).

The filing states that Defendants acted with scienter, knowing or being deliberately reckless about the true state of the Project’s finances and corporate structure. The complaint alleges that Defendants concealed the true nature of the project's financing, including the $72 million rescue loan, the $8 million loan to the Related Project, which was lost (Compl. ¶74), and the diversion of $5,000,000 from Dream Lender LP’s capital to pay down the senior loan. The complaint states, "Soliciting Defendants acted with scienter in that they knew, or were deliberately reckless in not knowing, the true state of the Project’s finances and corporate structure" (Compl. ¶117). The complaint further alleges that Defendants concealed or mischaracterized these facts while continuing to solicit and retain Plaintiffs’ investment capital, stating, "they concealed or mischaracterized these facts while continuing to solicit, retain, and control Plaintiffs’ investment capital" (Compl. ¶117).

The $33.3 Million Loan and Alleged Default

The centerpiece of the alleged scheme is a $33.3 million senior loan, which the complaint describes as a "Fraudulent Loan" and part of a "concealed, conflicted restructuring." According to the filing, Defendants incurred the loan on March 20, 2023, secured by a first-priority lien on the Project’s assets, effectively subordinating Plaintiffs’ equity positions. The complaint alleges that this loan was part of a broader pattern of racketeering activity, with Defendants commingling funds and using controlled entities as alter egos to shield personal liability. The complaint specifically describes the loan as a $33 million fraudulent loan (high-risk senior loan) (Compl. ¶81). The complaint states, "Plaintiffs allege that the Senior Loan was part of a concealed, conflicted restructuring..." (Compl. ¶81).

The complaint details how the $33.3 million loan was part of a series of high-risk loans that Defendants allegedly used to engineer defaults and capture remaining value through foreclosure or fees. The complaint states, "the Related Project supplied a model for the challenged restructuring of the Project" (Compl. ¶76). In the Related Project, a mezzanine lender instituted foreclosure proceedings on two properties in November 2022, completing the foreclosure in February 2023 and wiping out subordinate lenders’ interests (Compl. ¶75). The complaint alleges that Defendants replicated this model in the Hollywood Starlight World project, using the $33.3 million loan to subordinate Plaintiffs’ investments and ultimately foreclose on the collateral. The complaint further alleges that the ensuing default on the Fraudulent Loan was not merely an unforeseen business failure but resulted from specific acts and omissions undertaken for Defendants’ benefit, stating, "The ensuing default was not merely an unforeseen business failure but resulted from specific acts and omissions undertaken for Defendants’ benefit" (Compl. ¶82).

The complaint further alleges that Defendants misused investor capital to facilitate the Fraudulent Loan. Specifically, the complaint states that the first portion of Dream Lender LP’s capital, totaling $5,000,000, was used to pay down the senior loan (Compl. ¶48). This diversion of funds was allegedly concealed from Plaintiffs, who were led to believe their capital would be used to fund the Project and secure their equity positions. The complaint alleges that this misuse of funds was part of the broader scheme to mislead investors about the project's financial health and the use of their capital.

Plaintiffs were allegedly kept in the dark about the loan’s terms and the impending foreclosure, receiving instead a series of misleading updates about the Project’s financial health. For example, in an April 21, 2025, update, Defendants claimed the Project remained "optimistic about future operations," and in a January 9, 2026, letter, Defendants falsely stated that the "project was completed." The complaint alleges that these communications were part of a pattern of deception designed to lull Plaintiffs and their fellow investors into inaction while Defendants took steps to secure their control over the Project’s assets. The complaint states, "These purposefully engineered communications were designed to lull Plaintiffs and their fellow investors into inaction..." (Compl. ¶77). The complaint further alleges that Defendants concealed the true nature of the Fraudulent Loan, including its high-risk nature and the fact that it was used to subordinate Plaintiffs’ equity positions. The complaint states that Defendants disseminated letters describing various supposed "foreclosure auctions," postponements, negotiations with new investors, and purported "asset restructuring," while concealing the true state of the Project’s finances (Compl. ¶114).

Foreclosure Wipes Out Investments

The complaint alleges that the foreclosure extinguished Plaintiffs’ equity interests and their collateral, wiping out their investments. The foreclosure also allegedly jeopardized Plaintiffs’ immigration status, as Defendants failed to disclose USCIS’s termination of HIRC’s regional center status in January 2025—a fact Plaintiffs only learned in September 2025 via a USCIS letter. The complaint alleges that Defendants did not disclose the default on the $33.3 million loan or the scheduled auction to Plaintiffs, instead sending misleading letters about the Project’s financial health and the status of the foreclosure proceedings. The complaint states that Defendants concealed the default on the $33 million fraudulent loan (high-risk senior loan) and the impact of this default on Plaintiffs’ investments (Compl. ¶85).

The complaint details how Defendants allegedly used the foreclosure to capture the remaining value of the Project. On October 17, 2025, a private auction of interests in 6421 Restaurant and 6417 Hotel LLC was scheduled, but the complaint alleges that this auction was part of the broader scheme to mislead investors and eliminate their equity positions. The complaint states that Defendants disseminated letters claiming that foreclosure auctions were scheduled, postponed, and that negotiations with new investors were underway, all while concealing the true state of the Project’s finances and the foreclosure proceedings (Compl. ¶114). The complaint further alleges that Defendants concealed the default on the $33 million fraudulent loan (high-risk senior loan) and the impact of this default on Plaintiffs’ investments. The complaint states, "Defendants failed to disclose the default on the $33.3 million loan or the scheduled auction to Plaintiffs, instead sending misleading letters about the Project’s financial health" (Compl. ¶85).

The complaint also alleges that Defendants failed to disclose the administrative fees charged to Plaintiffs, which totaled $45,000 for Selma LP Plaintiffs and $55,000 for Dream Lender LP Plaintiffs (Compl. ¶48). These fees were allegedly used to further enrich Defendants while misrepresenting the true cost of the project to investors. The complaint states that these fees were part of the broader scheme to mislead investors about the use of their capital and the financial health of the Project.

Alter Ego Liability and Commingling of Funds

The complaint alleges that Defendants disregarded corporate formalities and commingled funds to such an extent that their controlled entities—including HIRC, RG, Selma LP, Dream Lender LP, and 6417 Hotel LLC—should be treated as alter egos of Chen and King. Among the allegations supporting alter ego liability:

• Unity of Interest and Ownership: The complaint alleges that Chen and King controlled the business and affairs of the entity defendants, holding themselves out as managers and making all operational and financial decisions. The complaint states, "Defendant Chen exercised authority and control over King, and, through King, over Defendants Dream Lender LP..." (Compl. ¶101). The complaint further alleges that Chen and King used their control to misrepresent the project's financial health, including the $52,000,000 equity contribution and the $33 million fraudulent loan (high-risk senior loan). The complaint states that Defendants used the alter ego entities to purposefully and knowingly withhold or mischaracterize material information about the true nature of the Project, including the Fraudulent Loan and the diversion of investor funds (Compl. ¶123).
• Commingling of Funds: The complaint alleges that funds and assets of the entity defendants were commingled, depleted, and diverted for the benefit of Chen and King. For example, HIRC was allegedly used as the payroll entity for a Related Project even after its USCIS termination. The complaint states, "HIRC was used as the payroll entity for the Related Project; even though USCIS terminated HIRC in September 2025..." (Compl. ¶102(d)(ii)). Additionally, the complaint alleges that Defendants commingled the $52 million shareholder equity portion of the project cost with other funds, using it to secure the $33.3 million loan and ultimately foreclose on the collateral. The complaint further alleges that Defendants diverted $5,000,000 from Dream Lender LP’s capital to pay down the senior loan, contrary to the representations made in the Phase V PPM (Compl. ¶48). The complaint states that this commingling of funds was part of the broader scheme to mislead investors and divert funds for Defendants’ benefit.
• Overlapping Officers and Directors: The complaint alleges that the entity defendants had overlapping officers and directors, including Chen, King, and Chen’s brother, who served as the registered agent for multiple entities. The complaint states that these overlapping officers and directors were used to further the scheme and shield personal liability, including the misrepresentation of the project's financial health and the diversion of investor funds. The complaint alleges that Defendant Jason Chen acted as a nominee agent for multiple Defendant entities, further facilitating the scheme (Compl. ¶101).
• Inadequate Capitalization: The complaint alleges that the entity defendants were inadequately capitalized, with USCIS terminating HIRC for non-payment of fees. The complaint further alleges that Defendants used the $72 million rescue loan to create the appearance of financial stability while ultimately engineering the default on the $33.3 million loan. The complaint states that Defendants’ inadequate capitalization was part of the broader scheme to mislead investors and divert funds for their own benefit. The complaint alleges that HIRC’s termination by USCIS was a direct result of its inadequate capitalization and non-payment of fees (Compl. ¶102(d)(v)).
• Shielding Personal Liability: The complaint alleges that Chen and King used the entity defendants to shield themselves from personal responsibility for their obligations to Plaintiffs. The complaint states that Defendants used the alter ego entities to control Plaintiffs’ capital and collateral, ultimately foreclosing on the collateral and extinguishing Plaintiffs’ equity positions. The complaint further alleges that Defendants used the alter ego entities to conceal the diversion of $5,000,000 from Dream Lender LP’s capital to pay down the senior loan and the misrepresentation of the $52,000,000 equity contribution. The complaint states, "Chen and King used the Alter Ego Entities to shield themselves from personal responsibility for their obligations to Plaintiffs" (Compl. ¶102(d)(vi)).

The complaint seeks declaratory relief to hold all Defendants jointly and severally liable for the alleged scheme under alter ego theory. The complaint alleges that Defendants used the alter ego entities to mislead investors about the project's financial health, including the $96 million total project cost, the $52 million shareholder equity portion, and the $24 million bank financing portion. The complaint further alleges that Defendants used the alter ego entities to conceal the $33 million fraudulent loan (high-risk senior loan) and the diversion of investor funds. The complaint states that Defendants used the alter ego entities to disseminate materially false and misleading statements, including the representation that the "project was completed" in January 2026 (Compl. ¶140(p)).

The complaint brings a total of ten causes of action against the Defendants, including:

1. Declaratory Relief – Alter Ego Liability (against all Defendants except Barrack and LCP): The complaint seeks a declaration that the entity defendants are alter egos of Chen and King, and that all Defendants are jointly and severally liable for the alleged scheme. The complaint alleges that Defendants used the alter ego entities to mislead investors about the project's financial health, including the $52,000,000 equity contribution and the $33 million fraudulent loan (high-risk senior loan). The complaint states that Defendants used the alter ego entities to conceal the true nature of the project's financing, including the $72 million rescue loan and the $8 million loan to the Related Project (Compl. ¶74).
2. Securities Fraud – Violation of Section 10(b) of the Exchange Act (15 U.S.C. § 78j(b)) and Rule 10b-5 (against Chen, King, Barrack, HIRC, RG, Dream Lender LP, Selma LP, HIRC Selma, 6417 GP, 6417 Hotel LLC): The complaint alleges that Defendants made materially false and misleading statements in the PPMs, partnership agreements, and ongoing investor updates, including misrepresentations about the project's financial health, corporate structure, and USCIS accreditation. The complaint states, "Soliciting Defendants made materially false and misleading statements in the PPMs, partnership agreements, and ongoing investor updates, including misrepresentations about the project's financial health and the use of investor capital" (Compl. ¶107). The complaint further alleges that Defendants concealed the $33 million fraudulent loan (high-risk senior loan) and the diversion of $5,000,000 from Dream Lender LP’s capital (Compl. ¶113).
3. Control Person Liability – Section 20(a) of the Exchange Act (15 U.S.C. § 78t(a) (against Chen and King): The complaint alleges that Chen and King exercised control over the entity defendants and are liable for the securities fraud committed by those entities. The complaint states, "Chen and King exercised control over the entity defendants, including the decision to incur the $33 million fraudulent loan (high-risk senior loan) and conceal its terms from investors" (Compl. ¶122). The complaint further alleges that Chen and King purposefully and knowingly withheld or mischaracterized material information about the true nature of the Project, including the Fraudulent Loan and the diversion of investor funds (Compl. ¶123).
4. Securities Fraud – Violation of California Corporations Code § 25401 (against Chen, King, Barrack, HIRC, RG, Dream Lender LP, Selma LP, HIRC Selma, 6417 GP, 6417 Hotel LLC): The complaint alleges that Defendants made materially false and misleading statements in connection with the offer and sale of securities, including misrepresentations about the project's financial health and corporate structure. The complaint states, "Defendants made materially false and misleading statements in connection with the offer and sale of securities, including the misrepresentation of the $52,000,000 equity contribution and the diversion of $5,000,000 from Dream Lender LP’s capital" (Compl. ¶129). The complaint further alleges that Defendants’ communications contained untrue statements of material fact and omitted material facts necessary to make the statements made not misleading, including the concealment of the $33 million fraudulent loan (high-risk senior loan) and the USCIS termination of HIRC (Compl. ¶129).
5. Fraud – Intentional Misrepresentation, Concealment, and False Pretenses (against all Defendants): The complaint alleges that Defendants made materially false and misleading statements and omitted material facts with the intent to deceive Plaintiffs. The complaint states, "Defendants made numerous material misrepresentations and omissions of fact in connection with the offer and sale of securities to Plaintiffs, including the concealment of the $33 million fraudulent loan (high-risk senior loan) and the diversion of investor funds" (Compl. ¶140). The complaint further alleges that Defendants made affirmative misrepresentations, including the false claim that the "project was completed" in January 2026 (Compl. ¶140(p)). The complaint states that Defendants lacked reasonable grounds to believe these misrepresentations were true and intended or expected Plaintiffs to rely on them (Compl. ¶141-142).
6. Negligent Misrepresentation (against all Defendants): The complaint alleges that Defendants made materially false and misleading statements without reasonable grounds for believing them to be true, and that Plaintiffs justifiably relied on these statements to their detriment. The complaint states, "Defendants made materially false and misleading statements without reasonable grounds for believing them to be true, including the representation of the $52,000,000 equity contribution and the use of investor capital" (Compl. ¶141). The complaint further alleges that Defendants’ misrepresentations included the false claim that the "project was completed" in January 2026 (Compl. ¶140(p)).
7. Breach of Fiduciary Duties and Constructive Fraud (against Chen, King, Barrack, HIRC, RG, Dream Lender LP, Selma LP, HIRC Selma, 6417 GP, 6417 Hotel LLC): The complaint alleges that Defendants stood in a fiduciary relationship with Plaintiffs and breached their duties by failing to disclose conflicts of interest, encumbering collateral, concealing defaults, and engaging in self-dealing. The complaint states, "Defendants breached their fiduciary duties by failing to disclose material facts, encumbering the collateral securing Plaintiffs’ investments with the $33 million fraudulent loan (high-risk senior loan), concealing defaults on the loan, and engaging in self-dealing" (Compl. ¶148). The complaint further alleges that Defendants’ sustained failures to disclose material facts and reassuring communications constituted constructive fraud, including the concealment of the USCIS termination of HIRC and the diversion of $5,000,000 from Dream Lender LP’s capital (Compl. ¶149).
8. Breach of Contract (against Chen, King, Dream Lender LP, Selma LP, HIRC Selma, 6417 GP): The complaint alleges that Defendants breached the partnership agreements by failing to use Plaintiffs’ capital for the Project, facilitate immigration petitions, and protect collateral interests. The complaint states, "Defendants breached the partnership agreements by executing the $33 million fraudulent loan (high-risk senior loan), defaulting on it, and allowing the USCIS sponsorship of HIRC to be terminated" (Compl. ¶157-159). The complaint further alleges that Defendants breached the agreements by diverting $5,000,000 from Dream Lender LP’s capital to pay down the senior loan (Compl. ¶158).
9. Civil RICO Liability – Violation of 18 U.S.C. § 1962(c) (against all Defendants): The complaint alleges that Defendants conducted the affairs of an enterprise through a pattern of racketeering activity, including mail and wire fraud. The complaint states, "Defendants conducted the affairs of the enterprise through a pattern of racketeering activity, including acts of mail and wire fraud, which were integral to the scheme and caused the foreclosure on Plaintiffs’ collateral" (Compl. ¶167). Plaintiffs seek treble damages of up to $74,115,000 under 18 U.S.C. § 1964(c) (3 × $24,705,000) (Compl. ¶174). The complaint alleges that the enterprise consisted of Defendants and others with the common purpose of controlling Plaintiffs’ capital and collateral, and that Defendants conducted the enterprise’s affairs through a pattern of racketeering activity requiring at least two acts of mail or wire fraud within ten years (Compl. ¶169). The complaint states, "any person injured in his business or property by reason of a violation of 18 U.S.C. § 1962" is entitled to treble damages (Compl. ¶162).
10. Accounting (against all Defendants): The complaint seeks an accounting of all EB-5 funds raised, their uses and destinations, the terms and proceeds of the $33.3 million loan, Project revenues and losses, and the proceeds of the foreclosure. The complaint states, "Plaintiffs are entitled to an accounting of all EB-5 funds raised, including the $5,000,000 diverted from Dream Lender LP’s capital, the terms and proceeds of the $33 million fraudulent loan (high-risk senior loan), and the proceeds of the foreclosure" (Compl. ¶177). The complaint further seeks an accounting of the administrative fees charged to Plaintiffs, which totaled $45,000 for Selma LP Plaintiffs and $55,000 for Dream Lender LP Plaintiffs (Compl. ¶48).

RICO Claim Alleges Pattern of Racketeering Activity

The complaint brings a claim under the Racketeer Influenced and Corrupt Organizations Act, alleging that Defendants conducted the affairs of an enterprise through a pattern of racketeering activity. The enterprise is alleged to consist of Defendants and others with the common purpose of controlling Plaintiffs’ capital and collateral. The complaint states that the enterprise included Defendants and others who shared the common purpose of controlling Plaintiffs’ investment capital, the $52,000,000 equity contribution, the proceeds of the $33 million fraudulent loan (high-risk senior loan), and the Project’s revenues (Compl. ¶176).

The complaint alleges that Defendants committed at least two acts of mail and wire fraud between 2023 and 2026, including:

• Disseminating fraudulent Project Progress Reports to conceal the true state of the Project’s finances, including the $33 million fraudulent loan (high-risk senior loan) and the diversion of $5,000,000 from Dream Lender LP’s capital. The complaint states, "These purposefully engineered communications were designed to lull Plaintiffs and their fellow investors into inaction..." (Compl. ¶77).
• Sending misleading letters about the $33.3 million loan, defaults, and foreclosure proceedings, including the false claim that the "project was completed" in January 2026 (Compl. ¶140(p)). The complaint states that Defendants disseminated letters describing various supposed "foreclosure auctions," postponements, negotiations with new investors, and purported "asset restructuring," while concealing the true state of the Project’s finances (Compl. ¶114).
• Failing to disclose USCIS’s termination of HIRC’s regional center status and the impact of this termination on Plaintiffs’ immigration petitions. The complaint alleges that Defendants concealed the termination of HIRC’s sponsorship, which placed Plaintiffs’ immigration status in jeopardy (Compl. ¶89).
• Concealing the administrative fees of $45,000 for Selma LP Plaintiffs and $55,000 for Dream Lender LP Plaintiffs, which were allegedly used to enrich Defendants. The complaint states that these fees were part of the broader scheme to mislead investors about the use of their capital and the financial health of the Project (Compl. ¶48).

The complaint alleges that these racketeering acts were integral to the scheme, causing the foreclosure on Plaintiffs’ collateral and the termination of HIRC by USCIS. The complaint states, "Defendants conducted the affairs of the enterprise through a pattern of racketeering activity, including acts of mail and wire fraud, which were integral to the scheme and caused the foreclosure on Plaintiffs’ collateral and the termination of HIRC by USCIS" (Compl. ¶171). Plaintiffs seek treble damages of up to $74,115,000 under 18 U.S.C. § 1964(c) (3 × $24,705,000), as well as costs and attorney’s fees. The complaint states, "Plaintiffs are entitled to treble damages of up to $74,115,000 under 18 U.S.C. § 1964(c) for the injuries suffered as a result of Defendants’ RICO violations" (Compl. ¶174).

Plaintiffs Seek Accounting and Damages

The complaint seeks a range of remedies, including:

• Accounting: For all EB-5 funds raised, their uses and destinations, the terms and proceeds of the $33.3 million loan, Project revenues and losses, and the proceeds of the foreclosure. The complaint states, "Plaintiffs are entitled to an accounting of all EB-5 funds raised, including the $5,000,000 diverted from Dream Lender LP’s capital, the terms and proceeds of the $33 million fraudulent loan (high-risk senior loan), and the proceeds of the foreclosure" (Compl. ¶177). The complaint further seeks an accounting of the administrative fees charged to Plaintiffs, which totaled $45,000 for Selma LP Plaintiffs and $55,000 for Dream Lender LP Plaintiffs (Compl. ¶48). The complaint also seeks an accounting of the $72 million rescue loan acquired by RG in 2021 and the $8 million loan to the Related Project, which was lost (Compl. ¶74).
• Damages: Including the loss of invested capital, loss of expected immigration benefits, and consequential damages, with a minimum claim of $24.7 million. The complaint alleges that Plaintiffs have suffered damages exceeding $24.7 million due to Defendants’ violations of securities laws, fraud, and breach of contract. The complaint states, "Plaintiffs have suffered damages, including but not limited to the loss of their invested capital, loss of expected immigration benefits, and consequential damages, exceeding $24,705,000" (Compl. ¶138). The complaint further alleges that Plaintiffs’ damages include the loss of their investments totaling over $94.9 million and the jeopardy to their immigration status caused by the termination of HIRC’s sponsorship (Compl. ¶98-99).
• Treble Damages: Under RICO, with a maximum claim of $74,115,000 (3 × $24,705,000). The complaint states, "Plaintiffs seek treble damages of up to $74,115,000 under 18 U.S.C. § 1964(c) for the injuries suffered as a result of Defendants’ RICO violations" (Compl. ¶174). The complaint alleges that Plaintiffs are entitled to treble damages because they were injured in their business or property by reason of Defendants’ violation of 18 U.S.C. § 1962(c) (Compl. ¶162).
• Declaratory Relief: Establishing alter ego liability for all Defendants and clarifying the misrepresentations regarding the project's financial health, including the $52,000,000 equity contribution and the $33 million fraudulent loan (high-risk senior loan). The complaint seeks a declaration that Defendants are jointly and severally liable for the alleged scheme, including the misrepresentation of the project's total cost of $96 million and the diversion of investor funds (Compl. ¶101).

The allegations in the complaint are unproven, and no Defendant has yet responded to the claims.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.