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