(Adds background on case)
By Nate Raymond
NEW YORK, Oct 22 (Reuters) - A U.S. appeals court on Wednesday dismissed Argentina's appeal of an order directing Bank of New York Mellon Corp to hold onto $539 million the country deposited for its restructured bondholders.
The 2nd U.S. Circuit Court of Appeals in New York in a brief order said it lacked jurisdiction over the appeal as the August ruling by U.S. District Judge Thomas Griesa was a clarification rather than modification of his earlier rulings on the matter.
Griesa had ruled that the $539 million that Argentina deposited in June with BNY Mellon for bondholders who participated in two sovereign debt restructurings was "illegal," and in an August order, directed the bank to retain the funds.
The judge, in his August ruling, also said BNY Mellon's retention of the funds would not violate his prior orders or subject it to liability.
A spokesman for BNY Mellon did not immediately respond to a request for comment, nor did a U.S. lawyer for Argentina.
Argentina defaulted in July after refusing to honor court orders to pay $1.33 billion plus interest to U.S. hedge funds suing for full payment on bonds following its earlier 2002 default.
The hedge funds, led by NML and Aurelius Capital Management, had spurned the country's 2005 and 2010 debt restructurings, which resulted in exchanges for about 92 percent of the country's defaulted debt.
Investors who exchanged bonds were paid less than 30 cents on the dollar.
The country's most recent default came after the U.S. Supreme Court declined to hear Argentina's appeal of a ruling that it must pay the holdouts when it paid holders of the exchanged bonds.
Griesa subsequently blocked BNY Mellon from processing a $539 million interest payment on what the country says is over $28 billion in debt.
The order sent Argentina on a course to default after no settlement was reached.
A later order, the one Argentina appealed, set out BNY Mellon's responsibilities to hold onto the money.
BNY Mellon, which filed a brief in the case, said Griesa's order helped protect it from liability, as "nearly every economic stakeholder in this litigation has either sued or threatened to sue" the bank, including Argentina. (Reporting by Nate Raymond in New York; Editing by Meredith Mazzilli and Tom Brown)