REFILE-Lead Argentina holdout creditor seeks bank subpoenas: source

Fri Aug 22, 2014 12:56pm EDT

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By Davide Scigliuzzo

NEW YORK, Aug 22 (IFR) - Elliott Management, the main holdout in Argentina's debt dispute, is preparing to subpoena a number of international banks as part of efforts to seize what it suspects are embezzled Argentine funds, a source at the hedge fund told IFR.

The action, part of Elliott's quest to recover around US$1.7bn in claims from its decade-long dispute with the sovereign, will target financial institutions including Citigroup, HSBC and Standard Chartered, the source said.

Through the subpoenas, Elliott hopes to collect information on transactions in Argentine sovereign bonds that it suspects have been used to launder embezzled state funds.

Some of the transactions targeted are related to Argentine businessman Lazaro Baez, who is accused in Argentina of having embezzled and laundered US$65m. He denies wrongdoing.

"We think a lot of money has moved around under the guise of Argentine sovereign bonds," said the source. "The banks don't take their obligations seriously when it comes to trading securities."

The source said Elliott is focusing on both foreign and domestic-law sovereign bonds, as both kinds of securities are widely traded internationally.

"Moving around bonds is much easier than moving around money," said the source. He indicated that this would be the first of several actions the hedge fund will pursue in relation to suspicious trading activity in Argentine sovereign bonds.

Billionaire Paul Singer's Elliott Management Co, through its NML Capital unit, is one of the lead creditors who sued Argentina for full repayment after the sovereign's 2001 default.

It has won a number of legal battles against the sovereign, including a green light from the US Supreme Court to seek information about Argentina's non-US assets.

Earlier in August, a federal judge in Nevada allowed NML Capital to obtain information on 123 corporations that the fund suspects were used to launder embezzled Argentine funds, according to court documents.

Seizing Argentine assets abroad is one of the avenues the fund is pursuing to enforce judgments it received in its favor.

A key US court ruling prohibiting Argentina from paying creditors who accepted its 2005 and 2010 restructurings - unless it simultaneously makes holdouts whole - pushed the sovereign into its second default in 13 years on July 30.

Hopes of a settlement between the sovereign and holdout creditors were further dashed this week, when Argentina announced a plan to swap newly defaulted bonds for local-law securities.

Citigroup, HSBC and Standard Chartered declined to comment. (Reporting by Davide Scigliuzzo; Editing by Paul Kilby)