CARACAS (Reuters) - A U.S. judge has authorized Canadian miner Crystallex to seize Venezuelan funds held in an account at Bank of New York Mellon Corp, according to court documents, as part of a long-running dispute over the 2008 nationalization of gold mining operations.
Crystallex is seeking to collect $1.2 billion plus $200 million in interest awarded by a World Bank tribunal in 2016, though it was not immediately evident how much is in the BNYM account.
The company’s aggressive legal gambit shows the risks that Venezuela faces in moving funds through the U.S. financial system, which is crucial for the country to pay its bondholders, amid increased pressure from the United States.
The U.S. District Court for the Southern District of New York issued a writ of execution on July 26 in favor of Crystallex against Venezuela, and it was made public on Thursday, according to court records.
Crystallex had asked for the writ on July 24.
Venezuela had originally placed funds in the BNYM account in 1992 as part of a $315 million contract with Ingalls Shipbuilding, now part of Ingalls Industries Inc, for maintenance and repair of naval frigates, Crystallex said.
A dispute about the nature of the work later led Ingalls to sue Venezuela in a court in Mississippi, where the repairs were to have taken place, according to the court documents.
Ingalls in 2002 won an injunction blocking Bank of New York from transferring the funds back to Venezuela, according to a copy of the injunction included in the Crystallex filing.
Bank of New York Mellon, the world’s largest custodian bank, declined to comment. Huntington Ingalls and Venezuela’s Information Ministry did not respond to requests for comment.
Venezuela’s capacity to move money through the international financial system is increasingly strained by sanctions that have blocked American citizens from doing business with certain top officials.
U.S. President Donald Trump signed an executive order prohibiting dealings in certain Venezuelan public sector debt to pressure the government of President Nicolas Maduro to halt its “tyranny,” the White House said on Friday.
Crystallex is the most advanced of some 20 companies seeking compensation from Venezuela, primarily in relation to a wave of nationalizations under late socialist leader Hugo Chavez.
Companies ranging from U.S. oil giant Exxon Mobil Corp to small gold miner Gold Reserve have won judgments against Venezuela through a World Bank arbitration panel called the International Centre for Settlement of Investment Disputes, or ICSID.
But collection has been difficult because it generally requires extensive litigation to win judicial orders allowing for asset seizures outside Venezuela.
Crystallex has already won court orders regarding assets held by Japanese bank Nomura and China’s Haitong International Securities Group Ltd.
Reporting by Brian Ellsworth in Caracas, additional reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman