SEC Announces Fraud Charges, Asset Freeze Against Vermont Ski Resort
On April 14, 2016, the Securities and Exchange Commission (SEC) announced fraud charges and an asset freeze against a Vermont-based ski resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.
The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vermont, and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont. Investors were told they were investing in one of several projects connected to Jay Peak, Inc., a ski resort operated by Quiros and Stenger, and that their money would only be used to finance that specific project. Instead, “in Ponzi-like fashion, money from investors in later projects was misappropriated to fund deficits in earlier projects,” the SEC said. More than $200 million was allegedly used for other-than-stated purposes, including $50 million spent on Quiros’s personal expenses and in other ways never disclosed to investors.
According to the SEC’s complaint (PDF), Quiros improperly tapped investor funds for such things as the purchase of a luxury condominium, payment of his income taxes and other taxes unrelated to the investments, and acquisition of an unrelated ski resort.
Andrew Ceresney, Director of the SEC’s Division of Enforcement, said the defendants “diverted millions of EB-5 investor dollars to their own pockets, leaving little money for construction of the research facility investors were told would be built and thereby putting the investors’ funds and their immigration petitions in jeopardy.”
The SEC’s complaint charges Quiros, Stenger, Jay Peak, and a company owned by Quiros called Q Resorts Inc. as well as seven limited partnerships and their general partner companies with violating the antifraud provisions of § 17(a) of the Securities Act of 1933 and § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Four other companies are named as relief defendants in the SEC’s complaint for the purpose of recovering investor funds transferred into their accounts. The SEC seeks preliminary and permanent injunctions, financial penalties, and disgorgement of ill-gotten gains plus interest. The agency also seeks conduct-based injunctive relief against Quiros and Stenger along with an officer-and-director bar against Quiros.