Moldova's Anatolie Stati and his companies earlier won damages against the Kazakh government and his pursuit of payment has lead to some 40 percent of the oil revenue-supported fund being frozen.
Details of the asset freeze, which took place in October, were reported by Reuters on Thursday and were subsequently disclosed at a court hearing in Britain.
"It's pretty unprecedented," said Simon Quijano-Evans, an investment strategist at Legal & General Investment Management in London. "If 40 percent of a sovereign fund is frozen and you don't have access to it, that should be an alarm bell for policymakers."
Kazakhstan's dollar bonds fell after the news while its tenge <KZT=> currency strengthened by 0.6 percent.
"Theoretically (the fund) is a national institution so it should cause a rethink for central banks and sovereign wealth funds as it’s been assumed so far that these assets were relatively immune," said Quijano-Evans.
At the heart of the case is a years-long legal row between businessman Stati, his son Gabriel, two family-controlled companies and the Kazakh government of President Nursultan Nazarbayev.
They invested in Kazakhstan's oil and gas industry and have asserted that they were subjected to significant harassment from the state aimed at forcing them to sell their investments cheaply.
Kazakhstan denies the allegations, but Anatolie and Gabriel Stati and two of their companies – Ascom Group S.A. and Terra Raf Trans Traiding Ltd., won an international arbitration award of around $500 million against the government.
It has refused to pay, however, and in October Kazakhstan filed a civil racketeering lawsuit in the U.S. District Court in Washington, D.C., against the Statis and their two firms.
The central bank, the National Bank, also filed a lawsuit against BNY Mellon challenging the asset freeze. However, the claim was dismissed by a judge in London on Thursday.
A spokeswoman for the Bank of New York Mellon declined to comment. Kazakhstan's justice ministry could not be reached for comment.
The freezing of the assets comes weeks after President Nazarbayev threatened to sack his cabinet if they failed to make large state companies bring back cash held abroad.
Nazarbayev, who wields sweeping powers in the oil-rich nation, poured scorn on private sector executives who, he suggested, were enjoying lavish lifestyles while keeping funds in foreign accounts.
(Additional reporting by Mariya Gordeyeva and Olzhas Ayuezov in Almaty and Sujata Rao-Coverly and Ben Martin in London; writing by Olzhas Ayuezov, Dmitry Solovyov and John O'Donnell; editing by Katya Golubkova, Jason Neely, Greg Mahlich)
By Mariya Gordeyeva and Olzhas Auyezov