Since 2008, Marriott International has attached itself to 15 developments that employed EB-5 financing, including a Courtyard Marriott in midtown Manhattan and a $168-million hotel in downtown Los Angeles. Hilton Worldwide, Hyatt Hotels and Starwood Hotels & Resorts Worldwide have also successfully leveraged the concept.

By comparison, Sethi's project, a planned 995-room, three-tower hotel and 190,000-sq-ft convention center, was "garbage from the start," says Gibson. "Documents that accompanied the offering raised serious questions about the project's feasibility and the projected valuation of its assets."

Land valuations and revenue projections quoted in documents didn't comport with prevailing market conditions, says Gibson. Sethi apparently represented the project's site as near O'Hare International Airport, but it was actually several miles away in Chicago's Norwood Park on a parcel formerly occupied by a budget hotel his family operated.

In addition, the SEC claims, the project's 2011 private offering memorandum falsely valued the parcel at $177 million. The suit alleges Sethi further duped investors by indicating he had secured all necessary construction permits as well as franchise agreements with Intercontinental Hotel Group, Starwood and Hyatt.

The SEC also accuses Sethi of falsely indicating that project developer Upgrowth LLC had more than 35 years of experience in the hospitality sector. Illinois corporate records indicate Upgrowth was formed in 2010. ENR was unable to reach Sethi for comment after several attempts.