U.S. District Judge Thomas Griesa made an unusual move of holding Argentina in contempt on Monday for evading his orders to settle longstanding dispute against hedge funds investors over default debt.
Griesa ordered Argentina to pay hedge fund investors some $1.5 billion, which they owe if the bondholders in the South American country be paid interest on their bonds.
The U.S. Judge made the announcement after a hedge funds lawyer led by billionaire investor Paul Singer’s NML Capital LTD. Claim that Argentina has defied Griesa’s orders for over a year now.
The judge wants to see actions taken by the executive branch of Argentina, which he claims has avoided and even ignored its financial obligations.
After the contempt ruling was issued, the Jorge Capitanich, the cabinet chief of Argentina, said the move was baseless and has no practical effect on the economy of his nation.
He said a U.S. court can’t do much on a country that is already in default and cut off from the international markets.
It was in 2001, when the South American nation was facing a big financial crisis when it defaulted on its debt. In 2005 to 2010 its bond holders exchanged their bonds through modified terms. A few hedge funds demanded full repayment. Griesa ruled in 2012 that Argentina should pay its holdouts before paying the new bondholders. The Judge’s order does not allow any U.S. financial institution to help transfer their payments. Last June, Argentina deposited money as payment at the Bank of New York Mellon, which is the bondholders’ trustee. The $539 payment was blocked and the country went to default.