The Government has stopped further payments to America's Cup Events, while it investigates Team New Zealand's use of public money.
The organisations have been at the centre of a Government inquiry, after Auckland Council and the Ministry of Business, Innovation and Employment (MBIE) alleged a "reclassified" $3 million loan and claims of fraud involving a Hungarian bank account.
On Thursday, MBIE confirmed the funding had been put on hold.
"While Crown and Council work through this process regarding the claims made relating to the organisation of the 36th America's Cup, we are not intending to make further payments to America's Cup Events Limited (ACE)," spokesperson Iain Cossar says.
"This will be revisited pending the outcome of the process."
Cossar says $40 million has been set aside for the event fee for the 36th America's Cup, which is due to take place in March 2021.
To date, MBIE has paid $29 million "in line with contractual funding milestones".
"This process is ongoing and there are contractual agreements in place," Cossar says.
"As to not undermine the current process, to protect commercial sensitivity and to protect the integrity of the ongoing investigation, we are unable to go into further detail at this time.
"We will provide an update when more information is available."
Team New Zealand have told Newshub that they agree with the decision.
"America's Cup Events (ACE) and Emirates Team New Zealand, in fact, supports the Government in holding funds until the process is complete and we have closed out all issues."