Ocasio-Cortez, Velázquez Call for Investigation Into Possible Martin Act Violations by New York Hedge Funds

August 5, 2020
Press Release

WASHINGTON, D.C. - Today, Representatives Alexandria Ocasio-Cortez and Nydia Velázquez led a letter to the New York Attorney General requesting an investigation into possible Martin Act violations by several New York-based hedge funds. Recent filings in the PROMESA Title III litigation revealed that some hedge fund groups may have engaged in insider trading by artificially manipulating bond markets. Since the bonds at issue were governed by New York State law and sold and marketed within the state, this falls within the jurisdiction of the New York Attorney General’s office. 

 

“This is an opportunity to investigate and hold accountable the various financial institutions that have exploited Puerto Rico,  which is facing the worst economic depression in its history, one that undoubtedly impacts New Yorkers who have historic, cultural, economic, and community ties to the island. We respectfully ask that your office initiate an investigation immediately into this potentially illicit conduct and hold accountable those who continue to seek to profit off of poverty,” reads the letter.

 

The Martin Act is a uniquely strong tool at the sole discretion of the New York Attorney General. As defined by New York courts, the Martin Act covers “all acts” that may “deceive or mislead the purchasing public,” even those without “any actual evil design or contrivance to perpetrate fraud or injury upon others.”

 

The letter is co-signed by New York delegation members Representatives Maloney, Serrano, and Espaillat. The full letter text is available here. The letter was also supported by the Center for Popular Democracy and LatinoJustice PRLDEF.

 

“For too long, we’ve seen Wall Street hedge funds and other bad actors profit from Puerto Rico’s debt, at the expense of the millions of American U.S. citizens who reside there,” said Congresswoman Velázquez. “Now, it appears that some of these vulture funds were using non-public information to purchase certain classes of Puerto Rico bonds, at the same time they were participating in the debt mediation process. Not only is this another example of deep pocketed interests profiteering off Puerto Ricans’ suffering, but these hedge funds may have also violated securities law. There needs to be an immediate, thorough investigation and any wrongdoing must be swiftly prosecuted.”   

 

Jesus Gonzalez, the Senior National Organizer and Strategic Partnerships Advisor at the Center for Popular Democracy, added, "The New York Attorney General Letitia James has a unique and powerful tool at her disposal to stand up for the people of Puerto Rico, including the more than one million Puerto Ricans living in New York. Credible allegations have been made that hedge funds, that have bought large portions of Puerto Rico’s debt at a steep discount, may have engaged in unlawful activity to make large sums of money at the expense of the Puerto Rican people. This has meant that while Wall Street gets richer, Puerto Rico’s economy continues to plummet and our communities suffer from its impact. We applaud and join the New York Congressional members in asking the New York Attorney General to open an investigation under the Martin Act: a New York State law that grants the New York Attorney General broad powers to investigate securities fraud, and has been used by previous attorneys general to police Wall Street to great effect."  

 

“We are encouraged by the letter sent by Congresswoman Ocasio-Cortéz and other Members of Congress to New York Attorney General Letitia James requesting that her office investigate numerous hedge funds for clear Martin Act violations, in order to continue profiting off of the pain of Puerto Ricans,” said Senior Counsel for LatinoJustice, Natasha Lycia Ora Bannan. “For years, these hedge funds and others engaged in scrupulous and illegal practices to plunge Puerto Rico into a debt they cannot get out of, causing the greatest economic depression on the island in its history.  The Puerto Rican people continue to suffer under an austerity regime as a result of the predatory practices of these hedge funds.  The Attorney General should make clear that such blatantly unlawful and immoral behavior will not be tolerated by New York companies.”

 

"PROMESA has allowed Wall Street to profit off of the suffering of Puerto Ricans. Although hedge funds have secured generous settlements and made billions off this crisis , it now appears that their greed may have driven some New York financial institutions to take illegal actions. We urge the AG to consider investigating this matter, and for Congress to abolish PROMESA now," said Congresswoman Ocasio-Cortez in a statement.