How a bank’s collapse brought grief to hundreds of account holders in Miami and Latin America
One of the few banks that allowed Venezuelans to move money abroad after the United States imposed sanctions on the country is at the center of a controversy over deposits, as clients in Miami, Puerto Rico and a number of Latin American countries have been unable to withdraw their money for more than a year.
An estimated $80 million are trapped inside Puerto Rico-based Nodus International Bank, a situation that has triggered a number of lawsuits, at least one of them in Miami, amid allegations that top executives and shareholders have diverted bank funds to enrich themselves instead of returning the money to their clients.
“There are not enough words for what I feel,” said Adelaida Cedeño, a 63 year old Venezuelan businesswoman living in Spain who has around $35,000 in the bank. “They kept feeding us lies from the beginning, and now there is not a person that would pick up the phone or answer an email, I feel like a victim of fraud.”
Cedeño, who trusted the bank to conduct transactions for her international trade firm, said she is about to lose her business and all of her accumulated assets due to the bank’s closure.
Like Cedeño, there are hundreds of Venezuelan nationals, some of them living in South Florida and others abroad, who are still waiting to get access to their funds after the bank ceased operations following a ruling in October 2022 from the U.S. Treasury Department that it was in violation of the Venezuelan sanctions.
Nodus’ accounts are not insured by the Federal Deposit Insurance Corporation, because it is registered as an international bank in Puerto Rico, which excludes it from U.S. federal coverage. Established in 2009, the bank had been mostly run by Venezuelans catering to Venezuelan business, although about 20% of its clientele came from other countries.
The bank had also sought to expands its operations to South Florida and in 2010 established a finance company, Nodus Finance LLC, which provided small business loans out of an office on Brickell Avenue.
Finding itself unable to operate after running afoul of Treasury in late 2022, the bank entered into a liquidation plan under the supervision of Puerto Rico’s Commissioner of Financial Institutions Office, agreeing to cease operations and operate its license for the sole purpose of liquidating its assets and returning depositors’ money.
But in March 2023, regulators in Puerto Rico noticed some strange dealings. The bank had made payments to directors and shareholders “inconsistent with the liquidation plan” and carried out transactions with people linked to the bank “that represent a conflict of interest that places Nodus in a dangerous position,” regulators said.
The Puerto Rican commissioner’s office also said it had “become aware that at least one of the shareholders has been indirectly collecting royalties and/or dividends” to allegedly complete the liquidation, and that “such compensation is not included in the liquidation plan’s budget.”
In an email sent to the Herald, Puerto Rican officials said that in light of the irregularities, the bank’s shareholders have lost their right to actively participate in the liquidation of Nodus International Bank. The regulators said they are considering “all remedies and sanctions available by law to ensure that the action taken is equitable to the damages suffered by depositors as a result of the diversion of funds.
Officials at Nodus Bank declined to respond to questions from the Miami Herald.
Most of the people affected were depositors from Latin American countries believing their money would be safer in an international bank than in a local institution. Most of them had deposited funds ranging from a few thousand of dollars to to tens of thousands.
The Venezuelan clients favored the Puerto Rico-based bank after the U.S. sanctions against the Nicolás Maduro regime had left them with few options, because the U.S. sanctions scared off many banks from taking on new clients from the South American country.
Carlos Calderon, a lawyer representing a number of Venezuelan clients of the bank, said the liquidation process for Nodus is not what normally happens in similar cases, because the plan sought to protect first the bank’s shareholders instead of the public. “The losers were the account holders,” Calderon said.
While the initial plan presented by the bank had offered account holders the possibility of recovering 90% of their deposits, clients now expect to receive much less in light of the recent Puerto Rican regulators’ warning about the bank’s liquidity problems.
Roberto Hung, another Venezuelan lawyer representing account holders, said information that leaked out of a recent meeting held in Puerto Rico between authorities and the bank suggests account holders are likely to be stuck with even less money than they were originally told.
“The information coming out of the meeting suggests that they are about to announce a new liquidation plan offering depositors with less than $20,000 their funds back with a 30% discount,” Hung said from Caracas. This means that depositors would get 70% of their money back.
The information coming out of those meetings also suggest that depositors with higher amounts would only get promissory notes from the bank that would come due after two years. If these are not paid, depositors then would get the bank shares held by the bank’s two main shareholders.
The lawyer said that if that happened, bank clients who are owed more than $20,000 might only be able to recover about 45% of their deposits.
Clients taking legal action against Nodus say they have problems trusting the bank’s willingness to make good on their deposits given the nature of the bank’s dealings.
In a lawsuit filed last year in South Florida federal court, executives of Argentinian company B&G said they opened an account with Nodus in December 2022 on the recommendation of a trusted advisor without being aware of the bank’s liquidity issues.
About five months before the bank ceased operations, B&G used Nodus to make a $214,000 wire transfer that was supposed to be received the same day by the recipient, but the money never arrived and was never returned. The bank refused to “provide any meaningful responses or answers to dozens of inquiries by B&G as to why Nodus Bank would not comply with its payment instructions,” the lawsuit says.
“This outrageous and unprofessional behavior left B&G’s principals with no choice but to retain counsel and to book a flight to Miami to confront Nodus Bank at its back office. On April 17, 2023, B&G’s principals walked into Nodus Bank’s back office and demanded answers regarding the refusal to return B&G’s money,” it says.
After being threatened with legal action, bank executives agreed to return the funds, but only gave back $150,000 of the initial amount, which led to the suit.
“My client is demanding to be paid the remaining $75,000,” B&G’s lawyer, Alejandro García,, adding that “there are people out there that are trying to collect much higher numbers.”
