The Securities and Exchange Commission brought charges against the owners of Jay Peak resort in Vermont’s Northeast Kingdom just as ski and snowboard season is winding down. The Miami-based ownership was allegedly using fraudulent EB-5 offerings to raise money and take a bit off off the top for themselves.
Jay Peak is wonderful mountain for snowsports, but you need to spend quite a lot of extra time getting there. Historically, there was not much at the mountain except for the mountain. Lately, the resort has added a hotel and an indoor water park. According to the SEC, the owners were involved in some shenanigans when raising money for these improvements.
The EB-5 Visa program allows an immigrant and family to live or work or retire in the United States. It requires investment in an enterprise that creates jobs for US citizens. The minimum amount of money to invest is $500,000 for an investment in a rural or high unemployment area. The EB-5 immigrant investor visa program is intended to attract foreign capital into the US and create jobs for American workers.
The Jay Peak program, combined with a similar strategy at nearby Burke Mountain and a biotech research building, was one of the biggest projects to be financed in this way.
According to the SEC complaint, the problem started with the purchase of the ski mountain. The head of the company, Ariel Quiros commingled funds from two separate investment programs to help fund the acquisition. Inexplicably, investor money was deposited in a brokerage account and Mr. Quiros arranged for margin loans and cross-collateralized the accounts across investment programs.
The final straw appears to be the biotech building. The offering documents misrepresented that there was FDA approval in place. The SEC also alleges that Quiros pocketed some of the investor money.
The SEC complaint is full of charges of mismanagement, theft and fraud.
I fear that the result will be a terrible blow to Jay Peak. I assume that half-completed projects will sit decaying in the ground for years, if not decades. The resort itself will not have the capital to operate well.
Sources:
- SEC Case Freezes Assets of Ski Resort Steeped in Fraudulent EB-5 Offerings
- SEC complaint
- Jay Peak on EB-5 visas
- JAY PEAK PROJECTS UNDER SEC INVESTIGATION BY ANNE GALLOWAY in the VTDigger.com
- JAY PEAK LOSES TRUST OF FIRST EB-5 INVESTORS by ANNE GALLOWAY AND HILARY NILES in the VTDigger.com
- Lure of Green Cards Brings Big Investments for Remote Resort in Vermont by KATHARINE Q. SEELYE in the New York Times