Peter Schiff, the libertarian economist and money manager who has been battling banking regulators in Puerto Rico, said Tuesday that he had reached a deal to liquidate his troubled bank.
Mr. Schiff, 59, owns Euro Pacific Bank, a boutique online bank based in San Juan. In 2020, Euro Pacific found itself at the middle of a global investigation into whether it had done due diligence on its account holders. A world group of tax authorities generally known as the J5, which included the Internal Revenue Service, investigated whether the bank had served as a vehicle for suspected tax evasion and money laundering.
In late June, bank regulators in Puerto Rico suspended Euro Pacific, citing “serious insolvency” issues. In a settlement reached Tuesday, Mr. Schiff agreed to return $66.7 million in deposits, using several million in gold to cover any money shortfalls. He has also agreed to pay $300,000 in fines, in keeping with a duplicate of the settlement.
A spokesman for Puerto Rico’s banking commissioner declined to comment and said the agency would release a press release in the approaching days.
The bank had some 8,000 depositors and $140 million in deposits until the investigation, generally known as Operation Atlantis, was reported by The Recent York Times in collaboration with news agencies in Australia. Mr. Schiff said the bank had approved fewer than half of applicants and closed greater than 5,000 accounts over compliance issues and red flags. He also said the media coverage made it inconceivable for Euro Pacific to conduct business, as corporations like American Express refused to work with the bank. A defamation suit is pending in Australia.
“There was no way those allegations were true, but once those stories broke, the bank’s business imploded,” Mr. Schiff said in an interview.
He insisted that the bank’s compliance against suspected money laundering was so strict that it turned down more accounts than it opened. “We were closing accounts on a regular basis,” he said.
He acknowledged that two years ago the bank was about $4 million short, since it had, he said, inadvertently been using clients’ deposits toward operating expenses. He said he had remedied the issue by pouring $7 million of his own money into the bank.
“I actually have invested $10 million on this bank,” he said. “I’m losing every little thing.”
But in Mr. Schiff’s mind, the settlement is something of a vindication, because he was not accused of cash laundering or some other allegations that swirled across the news of Operation Atlantis.
His lawyer, Lanny Davis, said Mr. Schiff had not been notified that he was either a subject or a goal of a federal investigation.
Justin Cole, a spokesman for the I.R.S. criminal investigations division, said that in the course of the investigation, it had turn out to be clear that the “most appropriate motion” was for Mr. Schiff’s bank to be de-registered.
Mr. Schiff had sought to sell the bank, however the banking regulators in Puerto Rico didn’t allow a sale.
Mr. Schiff, who worked as an economic adviser to former Representative Ron Paul of Texas and once ran for the U.S. Senate, gained fame for having predicted the 2008 financial collapse, earning him the name “Dr. Doom.”
Mr. Schiff has a widely known aversion to paying taxes and lives in Puerto Rico, where many wealthy Americans profit from special tax incentives generally known as Act 60.
“The federal government has never been comfortable with this Act 60 regime, where, as they see it, tax dodgers leave the U.S. and don’t pay their fair proportion within the U.S.,” said Miguel A. Soto-Class, president of the Center for a Recent Economy, a think tank in Puerto Rico. “They’ve never liked it, and so now bank regulators in Puerto Rico are getting plenty of questions from federal regulators about these foreign banks operating in Puerto Rico.
“They sort of have eyes on the situation here.”
