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Is escrow for the investment a USCIS requirement for EB-5?

I learned that many EB-5 investors put their investment in escrow accounts as they wait for the I-526s to be approved. Is this a USCIS requirement? Can I bypass the escrow step and put the money into the new commercial enterprise immediately?

Answers

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    Barbara Suri

    Immigration Attorney
    Answered on

    This would depend on whether the project is through a regional center or a stand-alone investment.

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    A Olusanjo Omoniyi

    Immigration Attorney
    Answered on

    Putting the investment fund in the escrow account is highly desirable. You should do it. The general rationale behind escrowing of investment funds is that if an investor's petition is not approved, the investor's fund can be easily and readily returned. In fact, if the investment agreement mandates such a requirement, it may make a difference between seeing an investor's money being protected from being spent (including fraudulently) by a regional center. If under any circumstances, the parties were to bypass the escrow process, the risk to the investor simply grows, even to the point losing the entire investment due to fraud or any other reasons.

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    Fredrick W Voigtmann

    Immigration Attorney
    Answered on

    Escrow is not a requirement. The requirement is for the EB-5 capital to be placed at-risk. One way to do that is through the use of escrow where release of the invested funds is solely conditioned on the filing or approval of the I-526 petition. Another way to meet the at-risk requirement is to deposit the funds directly with the new commercial enterprise and put them to use right away in the business. As long as the capital is subject to the potential for both gain and loss, USCIS will consider the funds to be at-risk.

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    Julia Roussinova

    Immigration Attorney
    Answered on

    Escrow is not a legal requirement for an I-526 petition. In fact, many regional center projects do have an early-release clause to be able to commence development of projects given lengthy I-526 petition processing times. If you are investing in a direct EB-5 commercial enterprise, you can certainly skip escrow as well. Hire an experienced EB-5 immigration attorney to competently prepare your I-526 petition.

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    BoBi Ahn

    Immigration Attorney
    Answered on

    Yes, you can bypass escrow and have your investment applied to project immediately. However, the escrow account provision is for your protection so that if the I-526 petition is not approved, you can get your investment capital returned. The escrow provision is not a USCIS requirement, but an allowable exception by the USCIS to have your money returned if the I-526 petition is not approved.

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    Sally Amirghahari

    Immigration Attorney
    Answered on

    That is not true. Matter in fact, most projects don't hold the investment fund in the escrow until the I-526 is approved. Generally, the holding time of the fund in the escrow depends to the project, which will determine what the stage the fund must be injected into the project. So, if you are doing direct EB-5 investment and it is your own project, then you probably don't need to have an escrow to hold your fund! So, I suggest to consult with an experienced EB-5 attorney regarding your issue.

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    Salvatore Picataggio

    Immigration Attorney
    Answered on

    Escrow is optional, and if you are OK with your money being used before the I-526 is approved in 2-plus years, then great!

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    Charles Foster

    Immigration Attorney
    Answered on

    No. There's no specific escrow requirement. You may bypass the escrow step and put your money directly into the new commercial entity.

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    Lynne Feldman

    Immigration Attorney
    Answered on

    Absolutely.

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    Mitch Wexler

    Immigration Attorney
    Answered on

    Escrow is not a legal requirement. It is common and prudent, especially for regional center-sponsored projects.

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    Blake Harrison

    Immigration Attorney
    Answered on

    Using an escrow account is not required under the EB-5 program.

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    Bernard P Wolfsdorf

    Immigration Attorney
    Answered on

    Escrow is not required and USCIS likes the money to be at-risk, so deploying into the NCE almost immediately is evidence that the capital is committed and at-risk. Moreover, most escrow agreements presently have early release and a holdback to cover contingencies.

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    Marko Issever

    EB-5 Broker Dealer
    Answered on

    The function of the escrow is to protect the EB-5 investors in a regional center format. Typically, the funds are wired to escrow and await for disbursement to the regional center who needs to provide the escrow certain documents indicating the progress of the project. Most of the time, these documents include, but are not limited to, commitment or disbursement of the senior loan from a bank or lender, certain necessary permits that allow construction to commence, etc. If the developer cannot provide these documents to the escrow through the regional center, then the investment funds cannot be withdrawn from the escrow. So, it is not a requirement by USCIS or any other regulatory body per se but a mechanism that is put in place to protect the rights of the investor. If you are in a direct investment situation and therefore you plan to put your own capital at-risk to execute your own project, there is no reason for you to have an escrow.

  • Avatar

    Hassan Elkhalil

    Immigration Attorney
    Answered on

    Yes, you can invest the money directly into your commercial enterprise.

  • Avatar

    Debbie Klis

    Securities Attorney
    Answered on

    Escrows with EB-5 investments and fundraising having become largely obsolete. The use of escrows began when the program was newer and I-526 approval took two to six months. It was an investor protection measure to give investors comfort that they would be refunded if their I-526 was not approved. As adjudication times grew, the escrows were still used but their condition precedent to release of funds was tied to other factors besides I-526 approval, such as raising a critical mass of the fundraising, which we call mini-max offerings. A few years ago, USCIS passed regulations prohibiting using raising a critical mass of the fundraising as a condition precedent to release of funds. Since then, escrows are seldom used.

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