Federal regulators have accused a Flushing couple of committing security fraud in connection with two real estate projects in Queens.
The Security and Exchange Commission (SEC) filed a complaint in Brooklyn federal court alleging that luxury developer Richard Xia and his company Fleet New York Metropolitan Regional Center LLC had scammed hundreds of Chinese nationals out of more than $229 million through EB-5 offerings to fund the Eastern Mirage project in Flushing and the Eastern Emerald project in Corona.
EB5 Affiliate Network (EB5AN) helps foreign investors obtain U.S. permanent residency, or green cards, through investments in U.S. real estate development projects within the guidelines of the EB-5 Immigrant Investor Program, a U.S. government effort that encourages new investment in job-creating projects.
The SEC’s complaint alleges that from 2010 through late 2017, Xia, through Fleet, fraudulently raised more than a quarter-billion dollars from more than 450 investors for the two real estate development projects.
According to the complaint, the offering materials made misrepresentations regarding the sources of financing for the projects, the experience of the project’s development and construction team, the scope of the Eastern Emerald project, and the existence of lease agreements among several entities that Xia owns and controls. Additionally, Xia allegedly misappropriated approximately $17 million in Eastern Mirage investor funds, and at least $11.8 million in Eastern Emerald investor funds.
The SEC’s complaint, filed in federal district court in Brooklyn on Sept. 28, charges Xia and Fleet with violating the anti-fraud provisions of the federal securities laws. The complaint seeks, among other relief, a permanent injunction, disgorgement, prejudgment interest, civil penalties, an asset freeze and the appointment of a monitor. The complaint also names Xia’s wife, Julia Yue, as a relief defendant and seeks disgorgement and prejudgment interest from her.
The couple allegedly solicited $500,000 from each investor in addition to a $50,000 processing fee, according to the SEC complaint.
“Developers offering securities in connection with the E-5 program have the responsibility to be truthful to their investors,” said Richard Best, director of the SEC’s New York Regional Office. “As we allege in our complaint, Xia misappropriated millions of investor funds and misled investors about the financing for the projects and the experience of the projects’ development and construction teams.”
The Eastern Mirage Project, located at 42-31 Union St. in Flushing, was scheduled for completion in 2013 but remains “an unfinished and empty glass tower,” according to the complaint.
The Eastern Emerald Project, located at 112-21 Northern Blvd. in Corona, has barely gotten underway and the complaint describes the site as “a largely vacant dirt hole surrounded by a concrete wall.” The real estate company previously announced it would be complete by 2024.
