How a bank’s collapse brought grief to hundreds of account holders in Miami, Latin America and beyond
An ad for Nodus International Bank
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 not been able to withdraw money for over a year.
An estimated $80 million is 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 the bank’s clients.
“There are not enough words for what I feel,” said Adelaida Cedeño, a 63year-old Venezuelan businesswoman living in Spain who said she 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 because of the bank’s closure.
Like Cedeño, hundreds of Venezuelan nationals, some of them living in South Florida and others abroad, are still waiting to get access to their funds after the bank ceased operations after a ruling in October 2022 by the U.S. Treasury Department that it was in violation of the Venezuela 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 was from other countries.
The bank had also sought to expand its operations to South Florida and in 2010 established a finance company, Nodus Finance LLC, which provided small business loans from an office on Brickell Avenue in Miami.
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 Office of the Commissioner of Financial Institutions, agreeing to cease operations and use its license for the sole purpose of liquidating its assets and returning depositors’ money.
But in March 2023, regulators in Puerto Rico noticed that the bank had made payments to directors and shareholders that regulators said were “inconsistent with the liquidation plan” and had engaged in activity “that represent a conflict of interest that places Nodus in a dangerous position.”
The Puerto Rican financial 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 Miami Herald, Puerto Rican officials said that in light of the irregularities, the bank’s shareholders had lost their right to actively participate in the liquidation of the bank. The regulators said they were 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.
Executives 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 local institutions. Most of them had deposited funds ranging from a few thousand of dollars to tens of thousands.
The Venezuelan clients favored the Puerto Ricobased bank after the U.S. sanctions against the Nicolás Maduro regime had left them with few options, because the U.S. sanctions deterred 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 get 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 those depositors would get 70% of their money back.
The information also suggests that depositors with higher amounts would get only promissory notes from the bank that would come due after two years. If these are not paid, depositors 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 be able to recover only about 45% of their deposits.
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. Adelaida Cedeño, 63, a businesswoman with $35,000 in the bank