Mr. Kraft's article entitled "Misappropriations Fraud: Detection and Deterrence" was featured in EB5 Investors Magazine. The publication provides comprehensive information on everything EB-5 related. Readers can expect articles written by only select experts in the industry. Kraft's article in the magazine focuses on the importance of due diligence and selecting a legitimate Regional Center.
"It is hard to miss the numerous news articles and SEC actions citing cautionary tales of EB-5 gone wrong. Allegations have revolved around misappropriation of funds, centering on diverting funds for other uses. The question that informed EB-5 practitioners are left with is who will be the antagonist in the next account of fraud? Will your firm be caught in the collateral damage zone, through association or client selections?
"It is impossible to prevent misappropriations fraud, but anyone can place themselves in a position to detect and deter."
Kraft is an expert on fraud detection and deterrence and often lends his knowledge on how to make sure investors are protected. He notes a number of key factors:
- Conduct background checks and verify resources and resumes
- Be aware if the Job-Creating Entity (JCE) and NCE are related, (which means that there is one less party reviewing the flow of funds) and if so, confirm that other parties are monitoring the transactions
- I-829 Approval: If the NCE Fund Manager misappropriated funds, the petition will most likely be denied on the basis that the full amount capital was not made available to the business most closely related to job creation
- Escrow: Know where the funds are going after they are released and know who is monitoring the movement of funds through the structure
- Attorney: Select an attorney for all due diligence and related legal services that is unrelated to the manager or regional center of the project
He touches on many other ways to prevent misappropriations fraud. "While you may think you have considered all possible factors which would confirm a solid investment, make sure you revisit all of the due diligence. The importance of thoughtful review cannot be overstated."