Things were looking bleak for the Lucky Dragon last summer.
Its casino and restaurants had been closed for months. The off-Strip resort was also in bankruptcy and, according to its main lender, bleeding cash.
Many investors — foreigners who shelled out a half-million each in hopes of getting a green card — were confused and angry about the bankruptcy, according to court papers. Some just wanted their money back.
The Lucky Dragon was eventually sealed off with chain-link fencing, seized through foreclosure and then sold last month. But the people who used to run the Lucky Dragon can’t wash their hands of it yet.
Its developers and prior management are facing lawsuits from Chinese investors, the project’s main lender and a Canadian high roller who paid a $400,000 deposit to lease the casino just one month before it abruptly closed.
It’s also unclear whether the Lucky Dragon’s roughly 180 foreign investors — who put money into the project through a federal immigration program — still have a chance at permanent U.S. residency.
In February, 40 of the investors said in a lawsuit that they hadn’t gained admission to the United States or obtained their conditional green card, and that they are “entitled” to a refund of their investment in the failed resort at 300 W. Sahara Ave.
“Losing your money is awful; on the other hand, if you don’t get a green card, that’s double punishment,” Southern California immigration lawyer Bernie Wolfsdorf told the Review-Journal.
‘Bankruptcy wiped everyone out’
The Lucky Dragon’s biggest set of investors consisted of foreigners looking for visas. The group, made up heavily of Chinese nationals, put money into the project through the federal EB-5 immigration program, bankruptcy court records show.
Each put in $550,000. All told, $89.5 million of their funds was used for construction and operations, and nearly $9 million was spent on “administrative” fees to the developer, according to bankruptcy records.
About $126.7 million was spent on construction costs for the Lucky Dragon, and the resort generated about $35.2 million in revenue its first year of operations, just 22 percent of its projected intake, according to a bankruptcy court filing last year by attorneys for most of the EB-5 investors.
Those lawyers also alleged in bankruptcy court papers last year that the EB-5 investors “were likely defrauded,” and that foreclosure of the resort could result in the foreign investors losing their money and “all hope of ever achieving permanent residency” through the program.
Project lender Snow Covered Capital foreclosed on the shuttered resort in late October and sold it last month for $36 million to Don Ahern, chairman and chief executive of Las Vegas construction-equipment firm Ahern Rentals.
Snow Covered Capital took ownership through foreclosure and obtained all of the sales proceeds, said listing broker Michael Parks, a hotel-casino specialist with CBRE Group.
“We were always under the impression that the bankruptcy wiped everyone out,” Parks said of the original investors.
Lucky Dragon developer Andrew Fonfa, founder of ASF Realty & Investments, declined to comment, as did the resort’s former chief operating officer, Dave Jacoby.
Project partner Bill Weidner and his attorneys did not respond to requests for comment, nor did former Lucky Dragon general manager Jordan Seager and his lawyer.
‘That’s the risk that they took’
Foreigners can obtain a green card for themselves and their families through the EB-5 program if they invest at least $500,000 in a new commercial enterprise, and that funding creates at least 10 full-time jobs, among other requirements. According to immigration attorneys, investors can lose both their money and their chance at a green card if the business goes under, but not always.
For instance, investors can lose their money in a project but still get permanent residency if the business creates enough jobs, lawyers said.
“There is really no absolute one answer,” said Muzaffar Chishti, director of the Migration Policy Institute’s office at New York University School of Law.
The Lucky Dragon’s sale, he added, has “kept alive the possibility” of the investors getting their green cards.
EB-5 investors want an opportunity to immigrate to the U.S., not necessarily make a lot of money in their targeted project, Las Vegas immigration lawyer Hardeep “Dee” Sull said.
But as with any venture, investors can lose big — and in EB-5 deals, they can also lose their chance at a green card.
“That’s the risk that they took,” Sull said.
Still, dozens of EB-5 investors banded together to sue Fonfa, Weidner, Jacoby and various limited liability companies Feb. 6.
In the complaint, 40 Chinese investors claim they are “unsophisticated foreign nationals” who were “fraudulently induced” by the developers into pumping more than $22 million into the project.
Their attorneys could not be reached for comment.
At least two other lawsuits against the Lucky Dragon’s former top bosses remain open.
San Francisco developer Enrique Landa’s Snow Covered Capital sued Fonfa, Weidner and Jacoby on April 8, two weeks before the sale to Ahern closed. The lender had doled out $45 million for the Lucky Dragon, foreclosed with a $35 million credit bid and claimed in its lawsuit that the developers are “responsible for the deficiency.”
Landa declined to comment. Jim McCarthy, a lawyer for Snow Covered Capital, said the amount of money his client is seeking will be an issue in the case.
Jason Chen of Vancouver, British Columbia, also sued Fonfa, Jacoby and former general manager Seager on Nov. 26.
Chen alleged in the lawsuit that he paid a deposit to lease the casino following “coordinated efforts to extract” the funds through “deceit” and “misrepresentation.” According to the complaint, he was told that the Lucky Dragon was profitable, getting heavy foot traffic and entertaining multiple purchase offers.
The casino building closed in January 2018, a month after he signed the deposit deal. Chen heard about the sudden closure through news reports, the lawsuit says.
An arbitration hearing is scheduled for Aug. 2, court records show.
Chen’s lawyer, Chaz Rainey, told the Review-Journal that his client is a casino investor and “pretty significant gambler.” He also said the Lucky Dragon was a “failing business,” adding this wasn’t disclosed to his client at the time.
‘Lock, stock and barrel’
The Lucky Dragon was the first hotel-casino built from the ground up in Las Vegas since the recession and was aimed at capitalizing on a coveted slice of the tourism market: Asian gamblers. The 203-room resort debuted in November 2016, but it struggled to draw big crowds and — after facing foreclosure and filing for bankruptcy — shut down less than two years after it opened.
Ahern — who was not named in any of the lawsuits — said Wednesday that he hopes to reopen the nine-story hotel tower in the next 60 days and to have transformed the former casino building into a convention hall by around Thanksgiving.
He also has no interest in learning about the former ownership. Ahern said he only recently found out there was “some guy” named Fonfa and that he does not want to meet the development team.
Moreover, he didn’t want to know how many EB-5 investors were involved “because I don’t even care.” He simply cared that he acquired the property with clear title.
“I just bought a building, and I own it — lock, stock and barrel,” he said.
To obtain permanent residency, EB-5 investors must file a petition with the U.S. government to establish their eligibility for the immigration program, and if that is approved, they can apply for a “conditional” green card, said Carolyn Lee, an attorney in Ithaca, New York, and chair of the American Immigration Lawyers Association’s EB-5 committee.
After two years of conditional status, investors can get an “unconditional” green card if they show the government that their funds created the required number of jobs and that they kept their investment in the project, Lee said.
If they fail to meet both tests and are already in the U.S., she said, they’re subject to being deported.