Red Flags for EB-5 Visa Applicants, Projects
1/21/26 – EB-5 visas are a special type of visa designed to attract foreign investment in American infrastructure projects and create American jobs. They put foreigners with approximately a million dollars to invest at the front of the immigration line. I asked ChatGPT, “What happens if you get an EB-5 visa, but then the project you invested in never gets built?”
That opened up a Pandora’s box. Evidently, the U.S. Customs and Immigration Service (USCIS) and Securities & Exchange Commission (SEC) encounter this problem frequently. Here’s what I learned after a day of online exploration.
What Happens If Project Is Never Built?
For applicants, the consequences depend on where they are in the EB-5 process and why the project failed. The outcome can range from merely losing their investment to losing immigration benefits or both.
EB-5 is not a “pay-for-visa” program. USCIS requires:
- Capital to be “at risk”
- It must create at least 10 qualifying U.S. jobs per investor
- Those jobs must actually be created, not just planned.
If the project is never built, job creation almost always fails — which is fatal to the visa.
ChatGPT
What happens to the visa depends on how the project fails and at which stage. There is no automatic protection. Approval of an EB-5 petition does not guarantee the success of the business or the return of capital. And the U.S. government does not underwrite or insure EB-5 investments.
Project failure is far more serious than in ordinary real-estate investing. EB-5 investors can lose both their investment AND their visa.
Red Flags in EB-5 Offerings
According to ChatGPT, these red flags appear repeatedly in failed EB-5 cases/projects.
“Job Cushion” Based Only on Future Projections
A legitimate EB-5 project should show at least 20-30% excess jobs based on hard construction costs alone. Danger signs include that cushion relying on future operations, such as a “Phase II.”
Developer with No Completed U.S. Projects
EB-5 visas are based on execution, not vision. USCIS does not care about renderings, master plans, press releases, or “international experience.” They only care whether buildings were actually built, certificates of occupancy were issued and operations began. Many EB-5 failures reportedly trace directly to “First U.S. Project.”
Vague Exit Strategy
EB-5 investors are almost always unsecured, subordinated, and last in line. Beware of phrases in promotional literature, such as “Sale Expected.” Repayment risk for investors may be extreme.
Floodway/Floodplain Location
A project located in a floodway or floodplain faces extraordinary engineering uncertainty. If construction is not feasible due to regulatory barriers, USCIS can later characterize the project as not viable from inception.
Refusal to Release Drainage Impact Analysis
If the project fails, this can become a material omission under federal securities law.
A Maze of Shell Companies
A complex web of LLCs and offshore entities may obscure ownership, transfer of funds, and transparency, especially if some entities are offshore or owned by foreign nationals.
Major Hotel-Chain-Involvement Claimed
Major hotel chains do not attach their names casually to projects. Saying major hotel chains are involved is a very common misrepresentation in EB-5 disputes. Brand usage without authorization has appeared repeatedly in prior SEC enforcement actions. Demand to see a signed letter of intent from any hotel chain touted as part of a project.
Why Hotels?
Hotels create not only construction jobs, they create permanent operational jobs, too – housekeeping, front desk, food & beverage, maintenance, management and more. This creates what EB-5 insiders call a “job factory.” Few other types of assets offer this.
Jobs can be modeled and assumed before anything is built. Reality is only tested years later…if the project gets built.
Hotels are also easy for foreign investors to understand. The psychological simplicity is powerful. But in the absence of a signed management agreement, beware.
Moreover, hotels are capital intensive, accommodating large numbers of EB-5 investors per project.
Finally, hotels can mask fatal land-use problems. EB-5 developers often propose them on floodplain land and wetlands, which conventional lenders avoid, but which foreigners may not understand.
A luxury hotel can be proposed almost anywhere on paper. And the difficulty of such sites can obscure the ultimate pending failure for years.
SEC and DHS investigators call this model “the hotel shell.” It’s a known “failure architecture.”
How Developers Can Quietly Fail EB-5 Projects
Most EB-5 projects do not collapse dramatically. They reportedly begin and then fade out according to a common pattern:
- Promotion with a glossy website, roadshows, and a conceptual master plan. Capital is raised before execution risk is visible.
- As time passes, investors are told of minor delays related to infrastructure costs, drainage requirements, off-site mitigation, and rising construction costs.
- The capital stack breaks (the order in which money is repaid if something goes wrong). EB-5 money alone cannot carry the project as lenders withdraw, interest rates rise, appraisals come in low, or construction bids exceed the estimate.
- Then silence! No press releases. No construction start. Updates stop. Investors receive only quarterly status letters. This phase can last years.
- Finally, the USCIS deadline arrives. No construction. No jobs. No recovery of investment. And visa revocation.
To Verify Whether Developers Have Actually Completed Projects
Do not rely on marketing materials. Do your own due diligence.
- Ask for Certificates of Occupancy from previous projects. Crosscheck those with county appraisal records. Check improvement values, year built, and square footage. If improvement value is near zero after several years, the project has not been built.
- Look for building-permit close outs. If permits remain open for years, that’s a red flag.
- Check for litigation. Search federal courts, bankruptcy courts and securities litigation. EB-5 failures often involve investor lawsuits, SEC actions and receiverships.
- And finally look for consistency of the developer’s track record. Be wary if completed projects are small (or overseas), but proposed projects are grandiose.
Posted by Bob Rehak on 1/21/2026 based on ChatGPT responses to multiple questions
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The thoughts expressed in this post represent opinions on matters of public concern and safety. They are protected by the First Amendment of the US Constitution and the Anti-SLAPP Statute of the Great State of Texas.
