The criminal sanctions-busting case against Halkbank will move forward while the Turkish state-run bank petitions the U.S. Court of Appeals for the Second Circuit to allow its lawyers to enter a special appearance on its behalf, a Manhattan federal judge ruled Thursday.

King & Spalding partner Andrew Hruska, an attorney for Halkbank, said Dec. 17 that he had petitioned the appeals court for mandamus, after U.S. District Judge Richard M. Berman of the Southern District of New York rejected the request earlier this month.

Halkbank is under federal indictment for allegedly helping Iran tap $20 billion in frozen funds in violation of U.S. economic sanctions,

Hruska argued that a stay was needed to avoid "irreparable harm," claiming for the first time that the bank's "further deterioration" would harm Turkey's economy and damage U.S.-Turkey relations.

Berman, however, noted Thursday that those problems likely "predated" the bank's Oct. 15 indictment on fraud, money laundering and sanctions-evasion charges, and said Halkbank had not identified any injury "other than that of its own making."

Halkbank, which is majority-owned by the Turkish government, has repeatedly refused to accept service in the case and has yet to show up in court, despite the threat of sanctions if it did not comply with two summonses.

King & Spalding, which has represented Halkbank for two years amid a Justice Department probe, moved in November to appear on behalf of Halkbank for the "limited and special purpose" of challenging the court's jurisdiction and trying to have Berman recused over supposedly prejudicial comments he made about the bank "both in and out of the courtroom."

According to Hruska, the case raised the "first impression" issue of whether a federal court in Manhattan could exercise personal jurisdiction over Halkbank, a foreign entity with no physical operations in the United States.

Berman denied the request Dec. 5, finding no Second Circuit precedent to support King & Spalding's contention that special appearances were appropriate in criminal cases. The bank, he said, would still be able to take up its jurisdictional and recusal motions following its arraignment in Manhattan.

On Thursday, Berman said Halkbank was unlikely to succeed on the merits, and a stay would only serve to slow the criminal proceedings against it.

"Issuance of a stay would impede the speedy adjudication of Halkbank's alleged role as facilitator of a $20 billion conspiracy to evade U.S. sanctions against Iran," he wrote in a five-page decision.

"The public has a strong interest in the prompt adjudication of the case against Halkbank," he said.

Deadlines for briefing in the case were extended to accommodate further proceedings in the Second Circuit.

Halkbank is accused in a six-count indictment of using a series of money service businesses and front companies in Iran, Turkey and the United Arab Emirates to transfer billions of dollars' worth of Iranian oil revenue in violation of prohibitions that barred Iran from accessing the U.S. financial system.

High-ranking officials in Iran and Turkey allegedly participated in the scheme, and some officials took tens of millions of dollars in bribes to shield it from the scrutiny of U.S. regulators and banks, prosecutors said.

In total, nine defendants have been charged, including Reza Zarrab, the Turkish-Iranian gold trader who pleaded guilty and later testified against Mehmet Hakan Atilla, a top Halkbank executive who was sentenced to 32 months in prison after a federal jury convicted him on five counts of conspiracy, money laundering and related counts.

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