Friday, June 14, 2024

DISAPPOINTING LIQUIDATION OF PUERTO RICO-BASED NODUS INTERNATIONAL BANK HIGHLIGHTS LACK OF FDIC PROTECTION WHERE MISCONDUCT OCCURS


A reader has requested an update on the liquidation situation regarding Venezuelan-owned but Puerto Rico-situated NODUS INTERNATIONAL BANK. After OFAC cited the bank for violations of Venezuelan sanctions in 2022, it went quickly into liquidation after the disclosure that shareholders, executives and insiders had fraudulently pulled out substantial funds, making withdrawals by depositors at the $80m bank problematic. International banks in PR do not have FDIC insurance and therefore depositor protection.

During liquidation, shareholders allegedly took illegal compensation, resulting in them being barred from participating in the proceedings. Currently, depositors are still in the dark regarding precisely how much of their money will be returned. The case has had a significant effect on Puerto Rico's emerging offshore banking industry, which has been plagued by problems, and should be an abject lesson regarding the necessity of conducting risk assessment in advance of establishing account relationships in uninsured situations.

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