Special considerations for non-U.S. citizens navigating business disputes while protecting visa status, avoiding immigration threats, and managing cross-border legal issues
If you're a foreign founder on any visa (H-1B, L-1, O-1, E-2, or even a green card holder), you face unique extortion risks that U.S. citizens don't face.
"Unless you settle for $X, we will report your visa violations to U.S. Citizenship and Immigration Services and Immigration and Customs Enforcement."
Why it's extortion: Threatening to report immigration status conditioned on payment is criminal extortion under both federal and state law.
"Settle immediately or we'll notify USCIS that you're working outside your visa conditions / you've been working for a company not on your H-1B / you're doing unauthorized consulting."
Why it's illegal: Using immigration consequences as leverage for civil settlement is textbook extortion (18 U.S.C. § 1951 federally, Penal Code § 518-519 in California).
"Pay us or we'll submit evidence to USCIS that will derail your green card application / naturalization process."
Why it's dangerous: Conditioning silence about immigration matters on payment = criminal extortion, even if the underlying claim has some merit.
"Unless you give me X% equity, I'll tell USCIS your startup doesn't meet the O-1 'extraordinary ability' standard / doesn't qualify as a 'substantial investment' for E-2 purposes."
The problem: Using visa qualification as a bargaining chip in a civil/business dispute is extortion.
Under 18 U.S.C. § 1951 (Hobbs Act) and state extortion statutes, threatening to report someone to immigration authorities UNLESS they pay money is a federal crime.
This applies even if:
If someone threatens your immigration status in exchange for payment, you have the right to report this to:
Important: Reporting extortion will NOT automatically trigger an immigration investigation against you. Law enforcement understands extortion victims need protection.
If you're a victim of extortion (including immigration-based extortion) and cooperate with law enforcement, you may be eligible for a U visa—a pathway to lawful status for crime victims who assist investigations.
When engaged in any business dispute as a foreign founder, you must protect both your legal interests AND your immigration status. Here's how:
The trap: Your H-1B is sponsored by Company A, but you start doing work for your own startup (Company B) on nights/weekends.
The risk: H-1B only allows work for the sponsoring employer. Side work requires separate authorization.
The fix: File an H-1B amendment for concurrent employment OR transition to O-1 visa which allows self-employment.
The trap: You obtained E-2 visa based on $100k investment, but you've withdrawn most of it for personal expenses.
The risk: E-2 requires "substantial" investment that remains at risk in the business.
The fix: Document that funds were used for legitimate business expenses, reinvest if possible, or transition to different visa category.
The trap: Your visa was based on "extraordinary ability" in your field, but your startup is failing and you have no job offers.
The risk: O-1 requires ongoing extraordinary achievement. Long unemployment gaps can raise questions.
The fix: Maintain evidence of continued extraordinary work (publications, speaking, consulting). Consider transition to H-1B if you get job offer.
The best defense is compliance BEFORE disputes arise. Annual immigration audits with qualified counsel can identify and fix issues before adversaries weaponize them.
Filing or defending a lawsuit does NOT affect your visa status. USCIS does not penalize lawful exercise of legal rights.
Exception: If the lawsuit involves allegations of fraud, criminal activity, or misrepresentation, consult immigration counsel before proceeding.
If you're concerned about public court records, arbitration provides confidential dispute resolution that keeps details private.
When settling disputes, include clauses like:
Foreign founders often face unique complications when the other party, assets, or business operations span multiple countries.
The problem: Your co-founder is in India, company is Delaware C-corp, operations in California, dispute arose in New York.
Key considerations:
Best practice: Contracts with foreign parties should include clear forum selection clauses (e.g., "All disputes shall be resolved in San Francisco Superior Court").
The problem: You win a $500k judgment against a foreign defendant in California court. They have no U.S. assets.
The reality: U.S. judgments are not automatically enforceable abroad. You must:
Countries that generally recognize U.S. judgments: UK, Canada, Australia, most of Europe (via treaty).
Countries that rarely recognize U.S. judgments: China, India (absent reciprocity), Russia, most of Middle East.
Why it matters: Arbitration awards are often more enforceable internationally than court judgments, thanks to the New York Convention (160+ signatory countries).
Best practice for foreign founders: Include arbitration clauses in contracts with international parties:
Common scenario: You send a demand letter to your co-founder. They immediately transfer company funds to an offshore account and flee to their home country.
Your options:
Before disputes arise, implement these safeguards:
Challenge: If the recipient's primary language isn't English, they may misunderstand the demands, deadlines, or legal implications.
Risk: They may claim they didn't understand and therefore didn't respond appropriately.
Solution: Consider providing translated version alongside English version (but specify English version controls if conflict).
Be aware: Direct confrontational demand letters that work in U.S. business culture may backfire with parties from cultures that value indirect communication and face-saving.
Example: In many Asian business cultures, aggressive legal demands can permanently destroy business relationships and make settlement harder.
Consider: Tone and approach that balances firmness with cultural sensitivity may achieve better results.
When dealing with international parties, consider engaging local counsel in their jurisdiction who understands both the legal system AND business culture. This can dramatically improve settlement prospects.
"Our client has retained us regarding the breach of your Founder Agreement dated March 15, 2024. Your unauthorized withdrawal of $250,000 from the company constitutes breach of fiduciary duty and conversion. If we cannot resolve this informally within 10 days, we will file a complaint in San Francisco Superior Court asserting claims for breach of fiduciary duty, conversion, and accounting."
Why it's safe: Focuses entirely on civil legal remedies through litigation. No immigration threats, no reporting to authorities.
"Unless you return the $250,000 within 5 days, we will submit a detailed report to USCIS documenting that you've been working without authorization, your H-1B sponsorship was fraudulent, and you've violated the terms of your visa. We will also contact ICE to request an investigation and potential deportation proceedings."
Why it's illegal: Explicitly threatens immigration reporting conditioned on payment. This is federal extortion (18 U.S.C. § 1951) and violates attorney ethics rules.
"We note that the conduct at issue may raise questions under immigration law regarding unauthorized employment. Our client reserves all rights under both civil and immigration law. We are prepared to discuss resolution of the civil claims."
Why it's safe: Acknowledges potential immigration issues but doesn't use them as leverage. Doesn't condition silence on payment.
"Settle this for $500k by Friday or we're filing a report with USCIS about your visa violations. Once USCIS investigates, your O-1 renewal will be denied and you'll be out of status. Your choice: pay us or get deported."
Why it's dangerous: Classic extortion pattern: "Pay X or we'll report you." This exposes the sender to criminal prosecution and attorney discipline.
"Pursuant to Section 12 of our Founders Agreement, all disputes must be resolved through binding arbitration under ICC rules. We demand arbitration and expect you to comply with the contractual dispute resolution mechanism. If you refuse to arbitrate, we will petition the court to compel arbitration."
Why it's smart: Focuses on contractual obligations. Arbitration awards under New York Convention are enforceable in 160+ countries—better than court judgments for international disputes.
"We know you're traveling to India next month for your sister's wedding. If you don't settle before then, we'll flag you to CBP (Customs and Border Protection) so you'll be detained when you return. We'll also alert authorities in India about the fraud charges."
Why it's illegal: Threatening to interfere with travel/immigration status as leverage for civil settlement = extortion. Also potentially false reporting to government agencies.
Remember: Even if the other party actually violated immigration law, you cannot condition your silence on payment. That's extortion regardless of the truth of the underlying facts.
Include these clauses in all founder/investor/employee agreements:
Schedule annual reviews with immigration counsel to:
Why it matters: Proactive compliance means adversaries can't use visa issues as leverage.
Minimize vulnerability through smart structuring:
The Founder: Priya, an Indian engineer on H-1B visa working for a tech company. She started a side business building a SaaS product on nights/weekends.
The Dispute: Priya brought on a co-founder, Mark (U.S. citizen), who contributed $50k for 40% equity. After 6 months, Mark wanted out and demanded his money back plus $100k for "lost opportunity."
The Extortion: When Priya refused, Mark sent this email: "You're on H-1B through your employer but you've been working full-time on this startup. That's unauthorized employment. Unless you pay me $150k by Friday, I'm filing a detailed complaint with USCIS and your employer's HR department. Your visa will be revoked and you'll be deported."
What Priya Did Right:
The Outcome: DA declined to prosecute but wrote letter to Mark's attorney warning that further threats would result in charges. State Bar opened investigation. Mark backed down completely. Priya fixed her H-1B compliance issue by filing amendment. Case settled for $30k (return of Mark's investment minus expenses).
The Lesson: Immigration threats are ILLEGAL even if there are actual compliance issues. Don't pay extortionate demands. Report to authorities.
The Situation: Two Chinese founders (both on F-1 OPT then H-1B) built an AI startup in San Francisco. Equal 50/50 equity split.
The Problem: One founder (Wei) got married and decided to move back to China. Before leaving, he transferred $300k from company account to personal account, then to Chinese bank.
The Challenge: Other founder (Lin) sent demand letter to Wei's last U.S. address. No response. Wei was now in Shanghai with the money.
Lin's Options Were Limited:
What Actually Happened: Lin filed suit in California, got $300k judgment. But Wei had no U.S. assets. Lin spent 2 years and $80k in legal fees trying to enforce in China with limited success. Eventually settled for Wei returning $120k (40% recovery).
The Lesson: Cross-border enforcement is extremely difficult. PREVENTION is key:
The Founder: Carlos, Mexican entrepreneur on E-2 visa based on $200k investment in his U.S. consulting business.
The Dispute: Carlos hired a sales consultant (Amy, U.S. citizen) with commission-based compensation. After 6 months, Amy claimed Carlos owed $75k in unpaid commissions.
The Extortion Attempt: Amy's attorney sent demand: "Your E-2 visa requires a 'substantial investment' that remains at risk in the business. Our investigation shows you've withdrawn most of the original $200k for personal use. Unless you pay the $75k immediately, we'll report to USCIS that your E-2 investment no longer meets the statutory requirements. Your visa will be revoked within 60 days."
The Reality: Carlos HAD withdrawn $150k over 18 months—but it was all for legitimate business expenses and his salary (which is permitted).
What Carlos Did:
The Outcome: State Bar opened investigation into Amy's attorney. Attorney immediately backed down and settled commission dispute for $28k (reasonable amount actually owed). No immigration report was ever made.
The Lesson: Bad actors exploit foreign founders' immigration fears even when there's no actual violation. Know your rights. Document compliance. Don't pay extortionate demands.
Even if you have actual visa compliance issues, threatening to report you UNLESS you pay is criminal extortion. The law protects you.
Save all emails, texts, letters. If threats are verbal, follow up in writing to confirm. This creates evidence for law enforcement and State Bar.
Paying validates the tactic and doesn't guarantee safety. Report to authorities instead.
International arbitration clauses, immigration non-interference provisions, and proper business structure prevent most problems before they start.
Consult both immigration counsel and business/litigation counsel. Understanding both dimensions gives you power to fight back effectively.