In July, Argentina’s decision to transfer a significant portion of its central bank gold reserves overseas came to light, prompting legal action from two hedge funds that had previously secured favorable rulings against the country. According to a report by the Buenos Aires Herald on October 5, Bainbridge Fund and Burford Capital have filed motions in a New York court to obtain information regarding these gold transfers, claiming the assets are eligible for seizure as compensation for their successful lawsuits.
The hedge funds seek details from Judge Loreta Preska, arguing that Argentina’s Central Bank operates as an “alter ego” of the state, implying it is not a distinct entity and thus its assets can be claimed directly. Bainbridge Fund, based in the Bahamas, had previously won a $95 million judgment against Argentina in 2023 related to its 2001 debt default. Following reports of gold being moved abroad, Bainbridge formally requested information on October 2 regarding the central bank’s reserves.
In a letter addressed to the judge, Bainbridge emphasized that Argentina had claimed the gold reserves exclusively belonged to the Central Bank, suggesting a lack of transparency about the actual holdings. Additionally, they sought clarification on “Letras Intransferibles,” which are securities exchanged with the Central Bank for access to liquid dollar reserves.
An anonymous source disclosed to the Herald that Argentina is preparing to respond to Bainbridge’s inquiries by October 9.
Burford Capital, which obtained a $16.1 billion judgment against Argentina for the expropriation of energy company YPF in 2023, has also joined the effort to access the country’s gold reserves. They have demanded information regarding various state-owned enterprises, including Aerolíneas Argentinas and Banco Nación, and have requested documentation from high-ranking officials associated with the government, including Economy Minister Luis Caputo and former customs head Guillermo Michel.
Burford argues that the Central Bank should also be considered an extension of the state concerning the gold reserves. Their claim is bolstered by the assertion that public statements regarding the transfer of gold were made by Caputo rather than the Central Bank’s president, further reinforcing their stance that the institution lacks independence in this matter.
These legal developments add another chapter to the ongoing saga surrounding Argentina’s central bank gold reserves, which became controversial after the Milei administration did not officially announce the transfers. The revelation came instead from the workers’ union, La Bancaria, led by left-wing legislator Sergio Palazzo, who sought information on gold transfers under the Law of Access to Public Information.
Initially, the Milei government admitted to moving a portion of the central bank’s $4.5 billion worth of gold abroad to “generate returns.” However, critics have raised alarms about the risk of seizure by foreign creditors due to Argentina’s historical legal disputes.
Luis Caputo defended the transfer, asserting that keeping gold abroad is strategically advantageous as it allows the country to earn returns, unlike holding it domestically. Economists have criticized this viewpoint, suggesting that the costs associated with transferring and insuring the gold could negate any potential gains.
President Milei hinted that the gold might serve as collateral for a bridge loan, essential for meeting upcoming debt obligations, including a $1.6 billion interest payment due in January 2025. He indicated that the bridge loan would facilitate an additional $3 billion payment to foreign creditors.
The transfer of gold sparked backlash from Argentina’s opposition, particularly from the center-left Unión por la Patria alliance, which criticized the government for its lack of transparency and demanded urgent clarification from Central Bank president Santiago Bausili about the gold’s movement. The opposition raised concerns about potential risks associated with the transfers, questioning the security of the gold while in transit or stored abroad.
In early September, the Central Bank publicly confirmed that portions of its gold reserves had been moved, asserting that the transfers were completed without prior public notice. Officials criticized what they termed “irresponsible” reporting about the gold’s relocation, stressing the need for confidentiality to safeguard national assets.
The Central Bank reiterated its commitment to maintaining confidentiality around the management of its reserves, claiming that such information is typically shared only with relevant auditing bodies under strict conditions.
Analysts speculate that the ultimate destination for Argentina’s gold reserves may be the Bank for International Settlements (BIS) in Basel, Switzerland, where the BCRA has historically deposited gold. Assets held by the BIS are typically protected under the principle of “sovereign immunity,” shielding them from seizure requests.
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