A North Carolina court has ruled on motions to dismiss in a complex case involving allegations of fraud and misconduct related to a failed hotel development in Charlotte. The plaintiffs, Hui Zhang and Jing Zhang, are Chinese citizens who invested in the project through the federal EB-5 immigration program. The court's decision affects the plaintiffs' claims against multiple defendants, including individuals and companies involved in the hotel project.
The case, Zhang v. CapitalNexus, LLC, was filed on June 25, 2026, in the North Carolina Business Court under docket number 24-CVS-55589. The plaintiffs allege that they lost their investments and are concerned about their immigration status due to the defendants' actions. The court's ruling is significant as it addresses the legal sufficiency of the plaintiffs' claims and the procedural requirements for bringing such claims.
Background
The plaintiffs, Hui and Jing Zhang, invested a total of $1 million in a hotel development project in Charlotte, North Carolina, through the EB-5 program, which allows foreign investors to obtain U.S. permanent residency in exchange for significant investments in American businesses. They allege that Tony Zhang, a key figure in the project, misled them about the risks and potential returns on their investment.
The plaintiffs claim that Tony Zhang provided them with promotional materials that downplayed the risks and promised protection for their investment principal. After investing, they allege that the project was mismanaged, leading to financial losses and jeopardizing their immigration status. They filed a lawsuit against Tony Zhang and several other defendants, including various companies associated with the hotel project, alleging fraud, breach of contract, and other claims.
The Ruling
Judge Adam M. Conrad presided over the case and issued an order granting in part and denying in part the defendants' motions to dismiss. The court found that the plaintiffs had failed to verify their derivative claims, leading to the dismissal of those claims without prejudice. However, the court allowed some of the direct claims to proceed, particularly those related to breach of contract.
The court ruled, "Because Hui and Jing did not verify the second amended complaint, the Court dismisses their derivative claims without prejudice."
The court also noted that the plaintiffs had muddled their theories of liability and engaged in group pleading, which made it difficult for the defendants to understand the specific allegations against them. Despite these issues, the court allowed certain claims to move forward, specifically those against Tony Zhang and CapitalNexus regarding the breach of the partnership agreement.
Impact
The court's ruling has significant implications for the plaintiffs and the defendants involved in this case. By allowing some claims to proceed, the court has given the plaintiffs a chance to seek redress for their alleged losses and to address their concerns about their immigration status. The case highlights the complexities of investment fraud cases, particularly those involving foreign investors and the EB-5 program.
Furthermore, the court's decision to dismiss the derivative claims without prejudice means that the plaintiffs may have an opportunity to refile those claims if they can meet the necessary procedural requirements. This ruling also emphasizes the importance of proper legal procedures in derivative actions, which require verification and prelitigation efforts to convince the general partner to bring claims directly.
What's Next
The case will continue as the plaintiffs pursue their remaining claims against the defendants. It is unclear if the defendants will appeal the court's ruling or if there are any related cases pending. The outcome of this case could set important precedents for future investment fraud cases, particularly those involving the EB-5 program and foreign investors.