Peter Schiff Has A Deal With Puerto Rico To Liquidate His Euro Pacific Bank, Says
Peter Schiff, a libertarian economist and money manager who has been battling Puerto Rican bank regulators, said Tuesday that he has reached an agreement to liquidate his troubled bank.
Mr. Schiff, 59, owns Euro Pacific Bank, an online boutique bank based in San Juan. In 2020, Euro Pacific found itself at the center of an international investigation into whether it had conducted due diligence towards its account holders. An international group of tax authorities known as the J5, which included the Internal Revenue Service, investigated whether the bank served as a vehicle for tax evasion and money laundering.
In late June, Puerto Rican bank regulators suspended Euro Pacific, citing “serious bankruptcy” issues. In a settlement reached on Tuesday, Mr. Schiff agreed to return $66.7 million in deposits, using several million in gold to cover any cash shortfall. He also agreed to pay $300,000 in fines, according to a copy of the settlement.
A spokesman for Puerto Rico’s Banking Commissioner declined to comment and said the agency would issue a statement in the coming days.
The bank had about 8,000 depositors worth $140 million until the investigation, known as Operation Atlantis, was published by the New York Times in cooperation with news agencies in Australia. Mr. Schiff said the bank approved less than half of the applicants and closed more than 5,000 accounts due to compliance issues and red flags. He also said that media coverage made it impossible for Euro Pacific to do business, with companies like American Express refusing to work with the bank. There is a defamation lawsuit pending in Australia.
“There was no way these allegations were true,” Schiff said in an interview, “but once these stories spread, the bank’s business collapsed.”
He insisted that the bank’s compliance against suspected money laundering was so stringent that it rejected more accounts it had opened. “We were closing accounts all the time,” he said.
He admitted that two years ago the bank was short of funds by about $ 4 million, because, he said, it was inadvertently using customer deposits to cover operating expenses. He said he fixed the problem by injecting $7 million of his own money into the bank.
“I invested $10 million in this bank,” he said. “I lose everything.”
But in Mr. Schiff’s mind, the settlement is a kind of justification, because he has not been accused of money laundering or any other allegations that have circulated around the news of Operation Atlantis.
His attorney, Lanny Davis, said Schiff had not been notified that he was either the subject or target of a federal investigation.
Justin Cole, a spokesman for the IRS’ Criminal Investigation Division, said that during the investigation, it became clear that the “most appropriate course of action” was to deregister Mr Schiff’s bank.
Mr. Schiff sought to sell the bank, but Puerto Rican banking regulators would not allow the sale.
Mr. Schiff, who served as an economic advisor to former Texan actor Ron Paul and once ran for the US Senate, gained fame for predicting the 2008 financial meltdown, causing him to be called “Dr. Death.”
Mr. Schiff has a known aversion to paying taxes and lives in Puerto Rico, where many wealthy Americans benefit from special tax incentives known as Law 60.
Miguel A. said: Soto Class, president of the New Economy Center Corporation, a Puerto Rican think tank. “They never liked it, and so Puerto Rican bank regulators are now getting a lot of questions from federal regulators about these foreign banks operating in Puerto Rico.
“They kind of have an eye on the situation here.”