NEWPORT — The Securities and Exchange Commission today announced fraud charges and an asset freeze against Jay Peak Resort and related businesses allegedly misusing millions of dollars raised through investments solicited under the EB-5 Immigrant Investor Program.
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 SEC alleges that Bill Stenger, Ariel Quiros, and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and as well as the proposed AnC Bio facility in Newport.
Investors were told they were investing in one of several projects connected to Jay Peak Inc., a ski resort operated by Stenger and Quiros, 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.
“This is obviously a difficult day for Vermont and for the many people, myself included, who are so invested in growing jobs and economic opportunity in the Northeast Kingdom,” said Gov. Shumlin. “Most of all, this is a difficult day for the hundreds of employees in the Northeast Kingdom who rely on Jay Peak, Q Burke, and the related projects that appeared to hold so much promise.”
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.
“Like Governor Shumlin, I am stunned and disappointed with the SEC report on the allegations of fraud in the Northeast Kingdom EB5 projects,” Newport Mayor Paul Monette said. “We will continue to monitor these developments to evaluate the impact on the Newport City projects.”