EB-5 regulations require an EB-5 investor to make an investment that is "at risk." The concept of "at risk" is not unique to EB-5 and has been part of the requirements for an E-2 Treaty Investor non-immigrant visa for decades. Nevertheless, in interpreting the term "at risk" in the EB-5 context, USCIS added a new twist. USCIS has interpreted the term to exclude any investment agreement that constitutes a "debt arrangement." In construing what constitutes a "debt arrangement," USCIS has rejected any agreement that provides an EB-5 investor with a right to redeem his or her investment at any time, even after the period of conditional residence is over, despite the fact that both the regulations and USCIS policy allow an investor to get his or her investment back after this "sustainment period." According to USCIS, any agreement that allows the investor a right to demand his or her money back or sell his or her shares back to the company, no matter whether it is contingent on any event or condition, and regardless of whether there is a promise to repay the investor, is an impermissible "debt arrangement." Under the regulations, a "debt arrangement" does not constitute an "investment," so USCIS has routinely denied I-526 petitions where the investor has any such purported right of redemption.
Many EB-5 stakeholders have argued that this policy makes no sense. An investor may have a right to request his or her money back at some point in the future without undermining the "at risk" nature of the investment, and without turning an equity investment into a loan or "debt arrangement". Fortunately, in Mirror Lake Village, LLC et al. v. Wolf (No. 19-5025), the U.S. Court of Appeals for the District of Columbia Circuit recently agreed. Notably, this appellate court victory is important for EB-5 because prior litigation victories related to the issue of redemptions were only district court cases, and USCIS has previously taken the position that it is not bound by such decisions it disagrees with.
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