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Apr 14, 2016 9:27 PM

Feds claim fraud at Jay Peak Resort, principals under scrutiny

Federal investigators are claiming an "massive" illegal scheme was in place in business ventures at the Jay Peak Resorts in Vermont.

A statement released by the U.S. Securities and Exchange Commission Thursday reported that the SEC announced fraud charges and an asset freeze against the Vermont-based ski resort and related businesses that were allegedly using millions of dollars raised through investments solicited under the EB-5 Investor Program.

EB-5 programs allow foreign investment in U.S. business projects. There are certain conditions that need to be met by the program, and at least 10 jobs need to be created within two years. By investing foreigners and their families receive Green Cards.

There are a small number of EB-5 projects in New Hampshire.

The SEC’s case was unsealed today in federal court in Miami, and the court has appointed a receiver over the companies to prevent any further spending of investor assets

The Burlington Free Press detailed the diversion of $200 million from resort project, including $50 million for personal use by Jay Peak owner Ariel Quiros of Florida.

The SEC alleges that Ariel Quiros of Miami, William Stenger of Newport, Vt., 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 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. 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, 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

“The alleged fraud ran the gamut from false statements to deceptive financial transactions to outright theft,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement. “As alleged in our complaint, 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 Section 17(a) of the Securities Act of 1933 and Section 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.

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