Chair Grijalva Leads House Lawmaker Letter Calling for Investigation of Insider Trading by Puerto Rico Hedge Fund Creditors
Washington, D.C. – Chair Raúl M. Grijalva (D-Ariz.) and other key lawmakers today wrote a letter to Natalie Jaresko, executive director of the Puerto Rico Financial Oversight and Management Board (FOMB), urging “a thorough, independent investigation into the serious insider trading allegations levied against hedge fund creditors in the context of the restructuring of Puerto Rico’s central government debt” before any further negotiations take place. The letter, available at https://bit.ly/3okYNUz, comes shortly after creditors filed a motion in federal court looking to finalize Puerto Rico debt negotiations quickly, before a comprehensive insider trading investigation can proceed.
As the authors of today’s letter write, “These insider trading allegations put the integrity of the restructuring proceedings into question, placing a cloud of illegitimacy over a process the result of which could bind the residents of Puerto Rico and all creditors for decades.” The FOMB – established under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) – represents the Government of Puerto Rico and its instrumentalities in debt restructuring proceedings.
In addition to Grijalva, the letter is signed by Reps. José E. Serrano (D-N.Y.), Chuy García (D-Ill.), Darren Soto (D-Fla.), Alexandria Ocasio-Cortez (D-N.Y.), Nydia M. Velázquez (D-N.Y.) and Adriano Espaillat (D-N.Y.).
In February, stakeholders involved in the debt restructuring proceeding raised concerns that some hedge funds were illegally trading on insider information while they stood to profit from more financial austerity imposed on the Puerto Rican people. An in-depth report by Public Accountability Initiative analyzing hedge fund holdings, released in August, concluded that investment patterns and price developments warrant an investigation and raise serious questions about the legality of hedge funds’ behavior.
Today’s letter is the latest move in an ongoing Democratic congressional effort to establish a fair process for investigating the insider trading allegations. In August, five Members of Congress from New York, led by Rep. Ocasio-Cortez, urged the New York Attorney General’s office to conduct an investigation.
More broadly, Chair Grijalva has conducted a series of oversight and legislative hearings throughout the 116th Congress to discuss concerns with the implementation of PROMESA and take recommendations from local stakeholders to amend it.
Earlier this year, Grijalva and Reps. Velázquez, Soto, Serrano, and Ocasio-Cortez introduced H.R. 6975, the Amendments to PROMESA Act. The bill includes provisions to create a Puerto Rico Public Credit Comprehensive Audit Commission to determine the amount of outstanding public indebtedness, the financial sustainability of the debt, and what policies can be implemented by the Government of Puerto Rico to address the debt; classify any document, record, or information relating to the public debt of the Government of Puerto Rico as a public document to improve fiscal transparency; and grant a qualifying territory that meets specified criteria the authority to discharge some of its unsecured financial obligations.
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