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Individuals who have profited off of cryptocurrency peers are taking a page out of hedge funds’ books and seeking residence on Puerto Rico to reap huge tax savings, Bloomberg News reported. High-earning investors in the U.S. pay up to 20% in capital gains tax and as much as 37% on short-term gains. In Puerto Rico, they pay nothing. And companies based on the American mainland pay 21% in federal corporate tax plus an individual state tax, compared to just 4% on the island. That makes the move a no-brainer for some investors, especially as the crypto market’s meteoric growth continues and Democrats push for higher taxes on the rich. The presence of digital currency enthusiasts is already palpable on the small island, where chance encounters and networking opportunities abound: Run-ins at taco stands; spontaneous drinks and dinner at luxury condos; “Crypto Mondays” gatherings at hotels and restaurants across San Juan.

Federal agents arrested the mayor of one of the wealthiest cities in Puerto Rico on corruption charges Thursday, the second such case announced this month, the Associated Press reported. Guaynabo Mayor Ángel Pérez Otero faces three counts, including bribery and extortion. He is accused of regularly accepting payments of $5,000 in exchange for awarding contracts to the owner of a construction company. The indictment alleges that the scheme ran from 2019 to 2021 and accuses the two of meeting in secret places and of using coded text messages. He was sworn in as mayor in August 2017 following a special election after the former mayor, Héctor O’Neill, pleaded guilty to sexual harassment, gender violence and violating an ethics law. Puerto Rico Gov. Pedro Pierluisi said in a statement that he was disappointed and extremely upset about the arrest. He demanded that Pérez resign immediately as mayor and as president of Puerto Rico’s Federation of Mayors.

The federal oversight board for Puerto Rico is putting the brakes on the commonwealth’s plans to turn a dockyard in Old San Juan into a party and entertainment district, complete with an “urban forest” and floating beaches, Bloomberg News reported. In a letter filed on Dec. 2, the Fiscal Oversight and Management Board said that the development deal between the Puerto Rico Convention Center District Authority and Las Brisas Property Management and CapRock Partners appeared to be a no-bid contract, and therefore in violation of the island’s bankruptcy regulations that require large deals “promote market competition.” Governor Pedro Pierluisi announced the “Bahia Urbana” — or Urban Bay — project earlier this week, saying the private companies were investing $118 million to revitalize a downtrodden area on the edges of the historic district. Once complete, the area would be home to bars, restaurants, an amphitheater, a tourism market and a 1,000 square-foot (93 square-meter) “urban forest” and floating sand-covered islands. The project is also expected to generate more than 250 jobs. Under the 20-year agreement, the Puerto Rico Convention Center District Authority, a government agency, would received $100,000 per year as rent and 3% of total revenue, estimated at about $7 million per year, the board said.

Puerto Rico creditors hoping the commonwealth exits its more than four-year bankruptcy in 2021 will need to wait a bit longer as the U.S. Department of Justice may weigh in on the process, Bloomberg News reported. U.S. District Court Judge Laura Taylor Swain is reviewing Puerto Rico’s plan to restructure $33 billion of debt, including $22 billion of bonds, after finishing closing arguments Tuesday on the debt adjustment plan. The hearings ended after hurricanes, earthquakes, political upheaval and the coronavirus pandemic postponed the bankruptcy process for years. Judge Swain is likely to wait until next year to issue her ruling because on Monday she gave U.S. government lawyers until Jan. 7 to decide whether to get involved in defending the constitutionality of the federal law, called Promesa, that allows Puerto Rico to reduce its obligations through bankruptcy.

A federal request for a 10- to 15-week pause in the Puerto Rico Plan of Adjustment confirmation process as well as the related constitutional challenge to the underlying bankruptcy law may threaten the Puerto Rico debt deal, the Bond Buyer reported. Five attorneys with the U.S. Department of Justice, led by Acting Assistant Attorney General Brian Boynton, asked Judge Laura Taylor Swain to give them until Jan. 31 to say whether they will defend the constitutionality of the Puerto Rico Oversight, Management, and Economic Stability Act and the U.S. bankruptcy code. If the DOJ decides to defend these things, they ask to have until March 2 to actually file their argument. Three parties in the bankruptcy have filed United States Constitution-based challenges to PROMESA in the Puerto Rico bankruptcy since Oct. 13. These appeals triggered required notices to the U.S. Attorney General to allow him or his attorneys to comment on the appeals. Normally the Justice Department would have until mid-December, 60 days after the notice of the constitutional challenge, to intervene in a case.

Congress took a major step yesterday toward enacting bipartisan legislation that would require McKinsey & Co. and other firms and professionals steering Puerto Rico through bankruptcy to disclose potential conflicts of interest, WSJ Pro Bankruptcy reported. A Senate committee with jurisdiction over Puerto Rico passed a bill to require lawyers, accountants, consultants and other professionals hired by Puerto Rico to disclose connections they have with the U.S. territory, its creditors or others employed to work on the debt restructuring. A companion version of the disclosure bill unanimously passed the House in February. Prior versions of the legislation had stalled in the same Senate committee. Lawmakers first proposed imposing the disclosure rules for Puerto Rico’s advisers in 2019 following media reports about potential conflicts of interest involving consulting giant McKinsey, a top adviser to the oversight board supervising Puerto Rico’s finances. McKinsey has also worked as an adviser in large corporate bankruptcy cases. The New York Times in 2018 reported McKinsey owned at least $20 million in Puerto Rico public debt through an investment affiliate while advising the oversight board. A Wall Street Journal investigation found McKinsey routinely disclosed far fewer names and descriptions of connections than other advisers working on corporate bankruptcies and that its investment unit held undisclosed financial stakes that gave it a direct interest in the outcome of bankruptcy cases it worked on. Following the press reports, the oversight board hired a law firm to investigate potential conflicts involving McKinsey, concluding in a 2019 report that it had mitigated potential conflicts because it “effectively walled off” its consulting business from its investment unit. The new disclosure requirements passed by the Senate Energy and Natural Resources Committee mirror rules that are already imposed on advisers working on corporate bankruptcies. Advisers hired by a bankrupt company are required to publicly disclose connections they have to the debtor, creditors or other parties so that a judge, the U.S. Justice Department or others involved in a chapter 11 case can ensure advice they give isn’t tainted by a potential financial conflict.

Puerto Rico is making its case in bankruptcy court for a plan to slash billions of dollars in debt, an expensive process that has so far racked up nearly $1 billion in legal and professional fees that island residents will pay, Bloomberg News reported. Hurricanes, earthquakes, ousting a governor from office and the coronavirus pandemic have prolonged the commonwealth’s bankruptcy to more than four years, adding to its costs and keeping the island under a cloud of default. Now that may finally change as U.S. District Court Judge Laura Taylor Swain began confirmation hearings Monday on Puerto Rico’s debt-restructuring plan, which eases the burden from $33 billion of bonds and other debt, including cutting $22 billion of bonds tied to the central government down to $7.4 billion. It would also create a reserve trust to prop up its broken pension system. Puerto Rico’s bankruptcy is the largest ever in the $4 trillion municipal-bond market, surpassing Detroit’s 2013 filing. The confirmation hearings follow years of negotiations with bondholders, insurance companies and labor groups over how to reduce the island’s obligations. Exiting bankruptcy will help the island move on and rebuild an economy that contracted for years.