Europe is hardly the safest place for financial assets these days, as Russia and Venezuela can attest. It may now be Argentina’s turn to have its assets frozen or even stripped.
As readers may recall, a few months ago Argentina’s Milei government began surreptitiously sending shipments of the country’s gold reserves to Europe, where they are purportedly sitting in the vaults of the Bank of England and/or the Basel-based Bank of International Settlements. Of course, Europe is hardly the best destination for financial assets these days, as Russia and Venezuela can attest. As we warned at the time, moving the gold overseas could invite attempts by Argentina’s legions of unpaid creditors to seize the gold as payment or collateral.
That is now beginning to happen.
So far, two hedge funds that have rulings against Argentina over debt in default and/or the 2011 nationalization of the oil company YPF have expressed a keen interest in knowing the whereabouts of Argentina’s gold. Once again, the cases will be heard in New York’s Southern District, where 10 years ago Judge Thomas P Griesa passed an outrageous judgment that, as Michael Hudson said at the time, essentially “prevented not only Argentina but all countries that issue bonds in the New York market from ever writing down or renegotiating the debt.”
Griesa’s ruling was in response to a suit brought by vulture funds to make the Argentinian government pay them 100% of the value of bonds, which they had purchased for a fraction of the face value. This time round, the two plaintiffs involved are asking New York Judge Loretta Preska to compel Argentina to disclose the whereabouts of its gold holdings, so that they can try to take possession of them.*
One of the creditor holdouts demanding discovery of Argentina’s overseas gold holdings is Bahamas-based Bainbridge Fund, which has holdings of Argentine public debt that was defaulted on during the country’s 2001 financial crisis. Bainbridge has refused to participate in any of the debt restructurings proposed by successive Argentine governments since, including the exceedingly generous offer made by the Mauricio Macri administration in 2016.
In 2023, Judge Preska gave Bainbridge the green light to seize Argentine assets worth $95 million plus interest. Now, the fund has launched a discovery process in Preska’s New York Southern District court. In other words, Bainbridge is asking the US court to compel Argentina’s government and central bank to disclose information about their assets and where they are being held, so that it can accelerate the collection of its debts.
“Bainbridge Fund is asking Judge Loretta Preska to order the Argentine Republic to produce information on the destination and use of the gold belonging to the Central Bank currently deposited in Europe,” explained Sebastián Maril, an expert on investor-state arbitration and CEO of Latin Advisor, on X. “Bainbridge is in the midst of asset discovery to collect unpaid damages… and also seeks to take possession of YPF shares in the hands of the State.”
Another fund that is seeking discovery the Burford Capital, a UK-based hedge fund that won a whopping $16.1 billion lawsuit against Argentina in 2023 for the expropriation of energy company YPF. Like Brainbridge, Burford’s 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.
Where Is Argentina’s Gold?
None of this should come as a surprise. In fact, it was so predictable that as Michael Hudson suggests in the comments thread below, Milei may have sent the gold to the UK precisely so that it could be seized. Given his near-total devotion to the Anglo sphere, this is is a very real possibility. As we noted in our August 6 post, “What Is the Milei Government Doing With Argentina’s Gold?“, the government’s decision to send multiple shipments of the country’s gold across the Atlantic under the cover of darkness puts it at high risk of seizure by unpaid creditors, of which Argentina has a very large number:
As readers may recall, London — and more broadly, Europe — are hardly the safest places to store gold reserves and other sovereign assets these days. In 2019, the UK government impounded Venezuela’s roughly $2 billion of gold deposits stored at the Bank of England after “derecognising” the Venezuelan President Nicolas Maduro in favour of the
US-self-appointed Juan Guaidó. Even after Venezuela’s leading opposition parties voted to oust Guaidó in 2023, the UK continues to hold on to Venezuela’s gold deposits.With Argentina facing numerous lawsuits over unpaid bills and debts, including one concerning the former Cristina Fernández de Kirchner government’s expropriation of roughly half of national energy company YPF, the risk of part or all of Argentina’s gold being seized is not negligible, as the Secretary General of the Banking Association and deputy, Sergio Palazzo, himself warns:
“The gold in transit may be seized by any judge who eventually orders a seizure for any of the cases Argentina has pending abroad. It’s an unnecessary risk being run, and [the central bank] should clarify to us Argentines the reason for this transaction, whether it is to exchange the gold for foreign currency in another country, or whether it is a credit operation, or whether it is a purchase and repurchase operation with the International Payment Bank.
It is largely thanks to Palazzo’s efforts that the people of Argentina are at least minimally aware that a large chunk of the nation’s gold has been moved across the Atlantic, though the specifics of the transfers remain vague. In mid-July, Palazzo made a FOIA request to the Central Bank of the Republic of Argentina (BCRA) asking the bank to confirm whether “operations to send gold bullion abroad had taken place during the month of June.”
Palazzo also asked the BCRA to provide details of the amounts involved, their ultimate destination, and the officials and administrative procedures behind the operations. The BCRA had 30 days to respond. It still hasn’t said anything. Citing security reasons, the BCRA has refused to say anything about the movements and location of gold in its reserves.
But on July 19, Argentina’s Minister of Economy (and former JP Morgan Chase and Deutsche Bank banker) Luis Caputo confirmed that gold reserves from the Central Bank had been sent abroad. But Caputo did not provide any clarity as to the amount of gold that had left the country or their current whereabouts. He even tried to present the operation as a shrewd financial move, rather than what it really was — the covert pawning of part of the nation’s gold:
“It is a very positive move, because today you have gold in the BCRA that is like a piece of property that cannot be used for anything. If you have it abroad, you can generate returns. It is much better to have it stored outside, where they pay you something for it.”
Caputo did not clarify how much gold had been sent, to which bank, or the kind of operation that was undertaken. As a result, no one knows exactly how much gold has left the BCRA’s vaults or where it is at. According to a recent article in Clarín on Milei’s increasing desperation, isolation and paranoia, $2.3 billion of Argentina’s gold — equivalent to roughly half of the nation’s total gold holdings — is now sitting in a vault in London. And another $700 million’s worth will soon be joining it…
Read the full article on Naked Capitalism
Nick Corbishley 