(Kitco News) – In the latest twist to the ongoing saga of Argentina’s sovereign gold reserves, New York Judge Loretta Preska has ordered the country to share information about the Central Bank’s gold to fulfill the request filed by hedge fund Burford Capital in October.
The Southern District Court of New York is probing Argentina’s assets for potential seizure to pay for the damages related to the lawsuit. After Burford wrote a letter to Judge Preska quoting newspaper articles from last July reporting that Economy Minister Luis Caputo confirmed that the Central Bank had moved some of its gold overseas, the government has yet to provide further information on the bullion transfers.
Last week, Argentina wrote a letter to Preska claiming that the Central Bank and the Republic are legally separate entities, arguing that the gold reserves do not belong to the government and their details are confidential. They claimed that the Central Bank’s reserves “enjoy special protection from execution under [United States’ Foreign Sovereign Immunities Act] and UK law.”
In her latest order, the judge countered that “regardless of whether the gold reserves are held by [the Central Bank], the Republic shall produce its own documents concerning the reserves.”
Preska also demanded information on government accounts held in the country and overseas, along with additional evidence from a separate lawsuit, in order to “trace the Republic’s assets.” She argued that Argentina must hand over SWIFT bank transfer data related to its accounts overseas in addition to the account summaries it has already provided, describing them as “inadequate substitutes, given they do not identify the counterparty’s specific banking institutions making or receiving payments.”
The judge also demanded documentation produced during the lawsuit that Bainbridge Fund won against Argentina in 2023 for US$95 million of debt securities defaulted in 2001, saying this evidence could “lead to other executable assets.”
Argentina attempted to argue that the documents would not lead to seizable assets for this case, but Preska countered that Burford was “entitled to request the information” regardless.
“The Republic does not get to just assert that such information ‘could not possibly lead to executable assets,’” Preska said. “The Court notes that it has likely taken more time and money to argue about producing these documents than to make the production.”
A spokesperson for the Argentinian Treasury declined to comment on their next steps.
In July, Argentina was revealed to have transferred a large portion of its central bank gold reserves abroad. Then, in October, Bainbridge and Burford each submitted filings to the New York court demanding information about the central bank gold transfers, arguing that the gold should be legally subject to seizure to pay for the rulings they won.
The two hedge funds “requested information from Judge Loreta Preska about the country’s Central Bank, intending to seize gold reserves after they were sent abroad,” the Buenos Aires Herald report said. “The funds’ proceedings revolve around the argument that Argentina’s Central Bank is an ‘alter ego’ of the state — a legal term meaning that it does not constitute a separate entity.”
The Bahamas-based Bainbridge Fund won a $95 million lawsuit against the South American nation in 2023 for its 2001 default on debt securities. On Oct. 2, Bainbridge submitted a written request for information on the country’s gold reserves.
“The Republic had previously stated that the gold reserves belong solely to the Central Bank and that it had no information about the reserves other than what the Central Bank made publicly available,” Bainbridge’s letter to the judge stated, noting the recent news reports that Argentina’s gold reserves had been transferred abroad.
The hedge fund also requested information on ‘Letras Instransferibles,’ which are “securities that the country’s Treasury places with the Central Bank in exchange for liquid dollars from international reserves,” claiming that Argentina failed to disclose information on them.
Burford Capital also argues that the Central Bank is an alter ego of the country as far as the gold reserves are concerned. They supported their claim by asserting that “when the financial institution received a public information request about its transfer of gold reserves out of Argentina, it was Economy Minister Luis Caputo rather than the Central Bank head Santiago Bausili who announced the operation to the press,” and that Caputo also offers “public statements about the government’s plans to strengthen the peso – an issue of monetary policy within the domain of [the Central Bank].”
In early September, the Central Bank of the Republic of Argentina (BCRA) formally announced that portions of its gold reserves had been moved out of the country, releasing a statement that it had “completed the transfer of part of its gold reserves in its different accounts.” BRCA officials also criticized what they called “irresponsible” reports about the gold going abroad and stressed the importance of keeping activities related to the country’s gold reserves confidential.
“The BCRA expresses its concern about the irresponsible diffusion of information, for political purposes, related to these operations before their completion because it put the security of the assets of all Argentines at risk,” the central bank said in a statement. “Information on the administration of BCRA reserves has always been handled confidentially in an effort to preserve its security. Both the General Audit of the Nation and the pertinent control entities maintain access to that information under the same cloak of confidentiality.”
Analysts have suggested that the final destination for the gold reserves is the headquarters of the Bank for International Settlements (BIS) in Basel, where the country has deposited gold belonging to the BCRA for years. All assets deposited with the BIS are supposed to have “sovereign immunity,” meaning they are not subject to requests for embargo or seizure.
