A federal judge in Washington, D.C. has thrown out one half of a joint lawsuit brought by two Chinese investors who poured $500,000 each into Staten Island's failed New York Wheel project, ruling that one of them tried to skip a mandatory step in the immigration appeals process. U.S. District Judge Reggie B. Walton granted the government's motion to dismiss Lulu Liu's claims, while her co-plaintiff, Li Liu, gets to keep fighting because she followed the rules Lulu Liu did not.
Lulu Liu and Li Liu submitted their EB-5 visa applications to U.S. Citizenship and Immigration Services in 2016, each investing $500,000 in the New York Wheel, a since-abandoned Staten Island Ferris wheel project. The EB-5 program allows foreign investors to seek U.S. permanent residency by funding business projects that create at least ten full-time jobs. According to Tampa Free Press, USCIS rejected both applications in 2024, stating that neither woman had proven her invested funds came from a legal source.
The two women responded differently to the denial, and that difference proved decisive. Lulu Liu filed a motion asking a local USCIS office to reopen and reconsider her case, which was denied in December 2024. Li Liu instead filed a formal appeal with the agency's Administrative Appeals Office, which was denied in May 2025 — but crucially, she had exhausted the required process before heading to court.
Why One Case Survives and the Other Doesn't
That procedural gap turned out to matter enormously once the two women sued jointly in October 2025, naming the Department of Homeland Security, Secretary Markwayne Mullin, USCIS and agency officials as defendants. They asked the court to declare their visa denials unlawful and order the agency to re-examine their cases. The Department of Homeland Security asked the court to dismiss Lulu Liu's portion of the suit on jurisdictional grounds.
Under the EB-5 Reform and Integrity Act of 2022, federal courts are barred from reviewing EB-5 visa determinations until an applicant has completed every available agency appeal — specifically, an appeal through the Administrative Appeals Office. According to guidance detailed by EB5 Status, filing a motion to reopen or reconsider with a local service center is legally distinct from an AAO appeal and does not satisfy that exhaustion requirement. Judge Walton ruled that the 2022 law applied to Lulu Liu's case because USCIS made its final decision in late 2024, well after the statute took effect.
Lulu Liu's lawyers made three arguments against dismissal, and Walton rejected all three. They argued an appeal would have been futile since the agency rarely reverses its own money-sourcing decisions, that agency rules made appeals optional rather than mandatory, and that applying the 2022 law to a petition originally filed back in 2016 was unfair. Walton found that federal laws passed by Congress override general agency regulations, and that courts cannot carve out exceptions when a statute strictly requires an appeal before allowing judicial review.
A Pattern Federal Courts Keep Repeating
The dismissal is not an outlier. As Justia Law reported, a federal judge in the Northern District of California dismissed a similar EB-5 investor lawsuit without prejudice in February 2026 in *Shah v. Emmel*, again because the plaintiffs had not finished their AAO appeals first. Legal analysts note that source-of-funds documentation gaps like the one that sank both Liu applications remain the single most frequent cause of USCIS Requests for Evidence and visa denials nationwide, according to analysis from Peter Chu, who notes USCIS denies roughly 16 percent of Form I-526 petitions annually. Federal regulation 8 C.F.R. § 204.6(j)(3) requires EB-5 applicants to produce forensic documentation establishing both the legal origin of their capital and an unbroken paper trail into project escrow accounts, a standard detailed by the Claxton Law Group.
The Wheel That Never Turned
The underlying investment collapsed years before either lawsuit was filed. The New York Wheel, once billed as a flagship EB-5 development on Staten Island's North Shore, was officially canceled in October 2018 after cost projections ballooned past $600 million, according to Construction Dive. The failure left 412 foreign investors who had collectively loaned $206 million facing immigration and financial uncertainty. Developers had already spent roughly $450 million in private funding before the shutdown, completing a 950-car parking garage and four 100-ton pedestal foundations that remained on site after the project died.
Even with the project dead, USCIS rules theoretically allow investors like the Lius to retain green card eligibility if capital spent before the shutdown produced enough qualifying jobs under indirect economic impact modeling. But that path still runs through the same forensic source-of-funds gauntlet that tripped up both women's original applications — the same regulatory hurdle Congress tightened further in 2022, when it raised the EB-5 investment minimum from the $500,000 threshold the Lius paid in 2016 to $800,000 for Targeted Employment Areas today, per the Claxton Law Group.
The New York Wheel case fits a broader pattern of foreign investors turning to federal court after EB-5 projects collapse. In June, 78 mostly Chinese investors filed a federal complaint in Washington state after losing $39 million tied to the failed Point Ruston Phase II waterfront development in Tacoma, as Hoodline previously reported. Similar disputes have surfaced in New York real estate developments, where investors have alleged misuse of green-card investment capital in separate civil litigation.
For now, Li Liu's lawsuit will move forward in Washington, D.C., since she completed the AAO appeal process before filing suit. Lulu Liu's claims are dismissed, though the ruling does not resolve whether either woman's underlying money-sourcing evidence would ultimately satisfy USCIS if her case is ever fully reviewed.
