Renowned investor George Soros's Quantum Partners has joined with three hedge funds to file a lawsuit against BNY Mellon's actions during the recent Argentine default.
Soros's firm, alongside Knighthead Master Fund, RGY Investments and Hayman Capital Master Fund, have filed the lawsuit in the High Court. The four hedge fund managers allege that BNY Mellon's actions in relation to Argentina's debt default at the end of July 'have been consistently designed to protect its own interests', CNBC reported.
The bank acted as an intermediary between the Argentine government and bond investors. It retained a $539 million interest payment owed to bondholders after receiving orders from the US District Court in New York.
The court ruled that Argentina could not pay creditors who accepted discounted restructured bonds under US legislation unless it also paid the American investment funds that rejected bond swaps in 2005 and 2010.
The move caused Argentina to default on its debt, even though the government argued it had met its debt obligations and encouraged holders of exchange debt to pursue BNY Mellon for payment.
If the lawsuit is successful it could put pressure on US District Judge Thomas Griesa, who has presided over Argentina's battle with the so-called 'holdout' investors, to exempt bonds that fall under jurisdictions outside the US.
The four hedge funds hold Argentine debt amounting to €1.3 billion and take the view that their euro-denominated bonds fall under English legislation and therefore should not come under the scope of the US District Court's rulings.
However, judge Griesa has ruled the bonds do because interest payments made on them pass through New York and therefore fall under US jurisdiction.
Reuters reported that BNY Mellon has dismissed the lawsuit.
'We continue to follow the current court order to hold onto the money,' a BNY Mellon spokesman told Reuters.
CNBC reported BNY Mellon's authorisation to operate in Argentina has been revoked. This happened as draft legislation seeks to replace BNY Mellon with state-backed bank Banco Nacion as an intermediary for payments on foreign law bonds.