Israeli Company May Help Argentina to Escape Huge Hedge Fund Debts

Business intelligence firm Black Cube in talks with Buenos Aires to find dirt on Elliott Management and avoid bond default.

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Argentina's President Cristina Fernandez De KirchnerCredit: Reuters

Black Cube, an Israeli company that supplies intelligence services to businesses, is negotiating with the government of Argentina for the hiring of its services. Argentina wants Black Cube to collect intelligence on the U.S. hedge fund Elliott Management, which has taken Argentina to court in New York to force it to pay up on bonds the country previously restructured. A federal court in Manhattan has ordered Buenos Aires to make the payments on the bonds owned by a number of hedge funds — and barred it from paying its main bondholders until it settles with Elliott Management, forcing Argentina into default on the new bonds.

If Argentina hires Black Cube, the company will act over the next few months to gather intelligence on Elliott, with the aim of presenting it to the court in a bid to have its ruling from mid-June overturned. Among other things, Black Cube is investigating is whether Elliott bought credit default swaps on Argentinean government debt. If so, the hedge fund would profit handsomely if Argentina defaults, a potential conflict of interest vis-a-vis the hedge funds’ stubborn refusal to reach a settlement with Argentina over the bonds.

Elliott and other funds are holding out for over $1.5 billion from Argentina, including back interest, on bonds with a face value of $170 million, for which they paid much less. Sources close to Elliott said the fund has no interest in forcing the Argentinean government into default.

Avi Yanus, a cofounder and head of the London office of Black Cube, is leading the Argentinean deal, has met in recent weeks with a number of the country’s officials on the matter.

Black Cube was founded in 2010 by Yanus and Dan Zorella, who served in a secret Israeli intelligence unit — as have many of the company’s employees. Black Cube describes its employees as “a select group of veterans of the elite Israeli intelligence community, whose diverse experience in information gathering, analysis, research, and field operations make Black Cube a unique resource in the global market.” Most of the firm’s business is in supporting legal disputes between large business entities, when one side is trying to collect intelligence on the other side in an attempt to win the case.

Black Cube made the headlines in Israel last year when it was hired by former IDB chairman Nochi Dankner to dig up dirt on Moti Ben-Moshe and Eduardo Elsztain, who succeeded in wresting control of the IDB conglomerate from Dankner. Dankner and IDB presented the Tel Aviv District Court with a report, partly based on information from Black Cube, on Ben-Moshe and Elsztain, but the court refused to cancel the transfer of ownership. Ben-Moshe said the information in the report was false and accused Yanus and Black Cube of falsifying evidence and submitting a false affidavit. Black Cube denied the claims, saying all its actions were legal.

Elliott Management said it knew nothing about any talks between Black Cube and Argentina, and hoped the country was not seriously considering such a step.

Black Cube declined to comment on the report.

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