Readers of this blog are well aware of the case we recently litigated successfully in the DC District Court entitled Battineni vs. Mayorkas. In my last blog relating to that case, I discussed possible future applications of the Battineni holding to a variety of different EB-5 scenarios, including EB-5 petitions involving money exchangers or intermediaries.
In fact, we have now received a decision in the first case to cite Battineni – Zhou vs. Noem. This case is an appeal of an I-526 denial based on failure to document the source of funds of a money exchanger. The February 6, 2025 decision of Judge Timothy Kelly, an appointee of President Donald Trump, expressly upholds all three major holdings of Judge Freidman in the Battineni case:
- Petitioner only needs to show “immediate source of funds, not … source of funds at some earlier point in time.”
- Money is fungible; there is no requirement to “trace every penny”
- The path of funds requirement only requires showing that the money is, in fact, the investor’s (or lender’s or giftor’s) funds.
Specifically, Judge Kelly notes that, in Battineni, the agency acted improperly by denying the petition for failing “to provide evidence of where [the lender] obtained the funds he lent to [the petitioner]. All he had to show was that the lender himself was a ‘lawful source of the funds.’” Judge Kelly continues: “Battineni fits this case to a tee. USCIS’ insistence that Zhou show that [the giftor] obtained his money lawfully is premised on the same ‘incorrect interpretation of the applicable regulations.’”
In addition to providing a whole hearted affirmance of the Battineni decision, the Zhou case also has two major holdings that will likely result in its being cited in many cases going forward.
The first major holding is that EB-5 petitioners do not need to document the source of funds of a money exchanger.
As we did in Battineni, we advocated in Zhou that USCIS’ adjudications are contrary to the regulations – and the regulations are the law. Judge Kelly agreed that two regulations govern these types of cases. 8 CFR 204.6 (e) – the definition of “capital” – references that capital does not include “assets acquired by unlawful means.” Judge Kelly agreed that there is a distinction between “assets” and “currency.” Giving money to a money exchanger results in a different form of currency, but does not result in a different “asset.” Therefore, the currency exchanger is not subject to the regulation referencing an “asset acquired by unlawful means” since the money exchanger does not create a new asset.
Secondly, 8 CFR 204.6(j)(3) refers to documentation of lawful source of funds. However, as the Judge notes, it only refers to documents of the “petitioner.” A money exchanger is not a petitioner and therefore has no requirement to provide source of funds documentation.
The other main holding in the Zhou case is that a petitioner does not need to document the source of funds of anyone who owned the asset before the petitioner since only the petitioner is subject to 8 CFR 204.6(j)(3). It is only necessary to show that the person or entity providing the gift is a lawful source. Specifically, in the Zhou case, the petitioner’s investment money derived from a gift from her husband. Even though the I-526 petition included documentation of the lawful source of funds of the giftor, this detailed documentation is not a requirement of the law. It would have been sufficient to show that the source of the invested money was the petitioner’s spouse – – it was not necessary to show how the spouse got the money he gifted.
In summary, the court holds that there is no need to document source of funds or path of funds for any person or entity other than the individual who invests in the NCE.
I note the following regarding the potential impact of the Zhou case:
- The court seems to draw a distinction between documenting how the giftor obtained the funds (which the law does not require) versus how the investor lawfully acquired the funds from the giftor. Put another way, the court requires the investor to show that she received the US dollars lawfully, not how the giftor obtained the funds. Language from the court’s decision that will likely be cited frequently is the court’s statement that, if an investor had to prove the source of funds of someone who owned the asset (the investment dollars) before the petitioner, the analysis could go back indefinitely. It is unclear to the court how petitioners could ever meet that burden. The court’s decision might have been different if there was a question regarding the lawfulness of the spouse giving the money to the petitioner or if there was a lack of proof that he actually gave her the money.
- In this case, there was complete documentation showing how the money went from Zhou to the currency exchanger to the NCE. This is required to show that it is really the investor’s money, which is the correct path of funds requirement.
- Both the Zhou case and the Battineni case can be applied to I-526 denials even from many years ago. Neither Battineni nor Zhou is based upon any new law. Rather both judges agree that this is what the law has always been. As such, these decisions would apply to even several year old I-526 denials that could now be challenged in federal court since the federal statute of limitations is six years.
It will be interesting to see how future cases apply Zhou and Battineni to agency decisions that have strayed from the requirements of the regulations and the precedent decisions. There is no doubt that they will be cited in virtually all future federal court source and path of funds cases, as well as filings with USCIS.
If you have any questions or have case that you would like considered for litigation, please contact one of our employment-based immigration attorneys.
The material contained in this alert does not constitute direct legal advice and is for informational purposes only. An attorney-client relationship is not presumed or intended by receipt or review of this presentation. The information provided should never replace informed counsel when specific immigration-related guidance is needed.
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