SEC Investigating EB-5 Fraud Allegations Against Richard Xia

The Securities and Exchange Commission is investigating a Queens developer following allegations that he used EB-5 program funds to purchase a trio of mansions on Long Island.

The SEC alleges Fleet Financial Group’s Richard Xia used investor assets as collateral to secure $30 million of loans to buy the Long Island homes, Crain’s reported. The SEC obtained an asset freeze against Xia and his company, Fleet New York Metropolitan Regional Center, in September.

The EB-5 program is designed to allow international investors to put money towards job-creating projects in exchange for a green card. It has become a favorite financing mechanism for developers. But in this case, the developer allegedly used that money to fund splashy personal purchases.

Two of the three properties that are part of the investigation are in Great Neck, while the other is in Sands Point. All of the properties lie on large plots of land and boast amenities such as tennis courts.

In a deposition, Xia said one of the Great Neck homes was acquired in a business transaction because it is used as an office. Xia’s contractor, Xi Verfenstein of Racanelli Construction Groupm allegedly used misappropriated funds to purchase the other Great Neck home; Xia said the contractor’s use of her payment was her decision.

Finally, Xia claims he purchased the Sands Point home to use as a dumping ground for contaminated soil at a Queens development site; the home includes an indoor swimming pool and a tennis court.

The SEC previously said that from 2010 to 2017, Xia and his firm fraudulently raised $229 million through five EB-5 offerings, misrepresenting the sources of financing, the experience of the development and construction team and the scope of the Eastern Emerald project in Corona, Queens.

Xia has not commented on the latest allegations.

Xia planned to break ground on Eastern Emerald project in September 2021. The 350,000-square-foot, 25-story project includes 256 hotel units and 196 condominium residences, as well as a conference and performing arts center and a bar and restaurant led by chef Shinichi Inoue, formerly of Michelin-starred restaurants Sushi Azabu and Sushi Inoue. Fleet had said at the time that the project would be carbon-neutral.

The project has not yet been developed, according to Crain’s.