Argentina endured another legal blow in the United States as New York Judge Loretta Preska ordered the seizure of US$210 million the country had in a U.S. bank account. She also ordered that an additional US$100 million connected to a dispute over defaulted bonds be frozen. 

Sebastian Marill, Regional Director of LATAM Advisors and an expert in Argentina’s international litigations, explained the details of the judge’s decision. 

“Preska approved the seizure of US$210 million from the collateral of Brady bonds. In the same order, she froze an additional US$100 million until two groups of defaulted debt creditors (Attestor Master and Bainbridge Fund) resolved their dispute over these funds,” he wrote in a post on X. 

The news comes on the heels of a U.S. Supreme Court ruling on January 27th that upheld the seizure of Argentine assets at the Federal Reserve by a number of investment funds. Judge Preska had been the first to rule in favor of these groups, a decision that was later upheld by Judge Debra Anna Livingston of the Second Circuit Court of Appeals. 

The legal battle was initially launched by investment funds in possession of sovereign bonds that defaulted in 2001. The plaintiffs had purchased defaulted Argentine on the secondary market and had not entered swaps and agreements the country offered in 2005, 2010, and 2016. They are estimated to represent 3% of total bondholders. 

In a writ of certiorari filed in December 2024, Argentina had petitioned the Supreme Court to review prior rulings by lower courts that embargoed an account in the Central Bank’s name. Since March 2023, the account in question contained money that remained after the maturity of U.S. Treasury bonds Argentina had received as a guarantee under the Brady Plan. The country claimed that U.S. sovereign immunity law should protect those assets from creditors. 

The Supreme Court, however, contended that sovereign immunity law could not protect money deposited in the Federal Reserve account. In their view, the funds met two requirements for being a seizable asset: they had been deposited in the United States, and it could be proven that they had been destined for the country’s commercial activity. In this case, the payment of financial obligations. 

Regarding sovereign immunity, and although the account is in the name of Argentina’s Central Bank, U.S. courts have ruled that the Argentine government was the ultimate beneficiary of the proceeds produced from the bonds.

The legal backstory

The context behind this decision can be traced back to the 1980s. A debt crisis sweeping Latin America led the United States government to intervene since the region’s main creditors were U.S. banks. In light of this, Secretary of the Treasury Nicholas F. Brady developed a plan to avoid a massive crisis and bankruptcy of his country’s banks. He approved restructuring Latin American countries’ debt by guaranteeing those securities — called Brady bonds — with bonds issued by the U.S. Treasury. 

U.S. banks agreed to restructure the liabilities of Latin American countries with the reassurance of this backing. 

The contract for these Treasury bonds stipulated that if a country defaulted on its obligations, the U.S. bond would be executed to pay the maturity. If, at the time of total debt cancellation, the country had used fewer Treasury bonds than had been issued as backing, i.e., had a balance in its favor, these funds would be automatically deposited as an asset of the country in question. 

Why is all this context essential to understanding this legal dispute? 

Because Preska’s initial ruling — later upheld by the Supreme Court — allowed investment funds Attestor Master Value, Trinity Investments, White Hawthorne, Bison Bee LLC, and Bybrook Capital Master to seize the remaining money that Argentina had received in March 2023 after the Brady Bonds matured.