Document ID: ./input/supremecourt_opinions/opinions/19pdf/18-1501_8n5a.pdf
Page Number: 7.0

4 

LIU v. SEC 

Opinion of the Court 

B 
The  SEC  action  and  disgorgement  award  at  issue  here 
arise from a scheme to defraud foreign nationals.  Petition-
ers  Charles  Liu  and  his  wife,  Xin  (Lisa)  Wang,  solicited 
nearly $27 million from foreign investors under the EB–5 
Immigrant  Investor  Program  (EB–5  Program).    754  Fed. 
Appx.  505,  506  (CA9  2018)  (case  below).    The  EB–5  Pro-
gram, administered by the U. S. Citizenship and Immigra-
tion  Services,  permits  noncitizens  to  apply  for  permanent
residence  in  the  United  States  by  investing  in  approved
commercial  enterprises  that  are  based  on  “proposals  for 
promoting economic growth.”  See USCIS, EB–5 Immigrant 
Invest-
Investor  Program,  https://www.uscis.gov/eb-5. 
ments in EB–5 projects are subject to the federal securities 
laws. 

Liu sent a private offering memorandum to prospective
investors, pledging that the bulk of any contributions would 
go toward the construction costs of a cancer-treatment cen-
ter.  The  memorandum  specified  that  only  amounts  col-
lected from a small administrative fee would fund “ ‘legal, 
accounting and administration expenses.’ ”  754 Fed. Appx., 
at 507.  An SEC investigation revealed, however, that Liu
spent  nearly  $20  million  of  investor  money  on  ostensible 
marketing expenses and salaries, an amount far more than
what the offering memorandum permitted and far in excess
of the administrative fees collected.  262 F. Supp. 3d 957, 
960–964  (CD  Cal.  2017).  The  investigation  also  revealed 
that  Liu  diverted  a  sizable  portion  of  those  funds  to  per-
sonal accounts and to a company under Wang’s control.  Id., 
at 961, 964.  Only a fraction of the funds were put toward a 
lease,  property  improvements,  and  a  proton-therapy  ma-
chine for cancer treatment.  Id., at 964–965. 

The SEC brought a civil action against petitioners, alleg-
ing that they violated the terms of the offering documents 
by misappropriating millions of dollars.  The District Court