A federal judge has issued a scathing ruling against Jay Peak developer Ariel Quiros, agreeing preliminarily with federal regulators that the Miami businessman was the mastermind behind the largest EB-5 fraud case in the country that played out in the mountains of northern Vermont.
Judge Darrin P. Gayles, in a ruling handed down on Monday in federal court in Miami, froze the assets Quiros, the owner of Jay Peak, had accumulated through funds raised from EB-5 investors meant to pay for developments in northern Vermont. The judge also barred Quiros, a Miami businessman, from raising funds from the program.
Gayles agreed to the request for the injunction against Quiros from the U.S. Securities and Exchange Commission, and in a 44-page ruling, said the SEC wove “a compelling and well-documented account of one man’s use of his control over multiple entities to squander investor funds, enrich himself, and, ultimately, commit securities fraud.”
“The record supports a preliminary finding that Quiros was the architect of a fraudulent scheme to use the investor fund to enrich himself,” Gayles wrote.
“The result is a financially strapped ski resort, unpaid contractors, unfinished projects, and unhappy investors at risk of losing their residency status in the United States,” Gayles added. “Accordingly, the court finds a preliminary injunction necessary to maintain the status quo pending trial on the merits.”
Gayles found that Quiros acted with “severe recklessness” in intentionally defrauding investors.
Foreign investors in the EB-5 program who put money in qualified projects can become eligible for permanent U.S. residency.
Quiros and his former business partner Bill Stenger, the Jay Peak’s former CEO, are both accused in a federal lawsuit brought by the SEC in April of misusing $200 million in investors funds raised through the EB-5 program, meant to finance projects in Vermont’s Northeast Kingdom.
Of that total, the state and federal lawsuits contend, about $50 million was misappropriated, in part, for Quiros’ personal expenses, including more than $2 million for a luxury condo in Trump Tower in New York City.
Stenger earlier this year reached a settlement with the SEC, admitting no wrongdoing. He agreed to cooperate with investigators. He still faces the possibility of a monetary penalty based on his level of cooperation and ability to pay.
Quiros fought the SEC allegations and argued that he made reasonable profits from the development.