The anticipation surrounding the CITGO auction remains high due to recent developments. On one hand, the Venezuelan parties have filed a motion to disqualify the judicial expert, Robert B. Pincus; on the other, Gold Reserve reported irregular secret payments of USD 170 million to advisors involved in the sale of PDV Holding’s shares.
Following this, Gold Reserve submitted a document to the Delaware Court addressing several critical points related to the judicial sale of CITGO Holding’s parent company to satisfy court rulings.
Gold Reserve is seeking a mechanism to prevent double recovery of the judgments, arguing that the U.S. Office of Foreign Assets Control (OFAC) sanctions prohibit the PDVSA 2020 Bondholders from interfering with their transaction closure by voting on CITGO Holding’s shares.
The company reminded that Delaware law requires shares to be sold to the “highest bidder”—which Gold Reserve claims to be their own—while questioning how the judicial expert is managing the CITGO auction process. They requested the court to dismiss Amber Energy’s Updated Final Recommendation and approve their improved offer.
Arguments of Gold Reserve
Before the U.S. District Court for the District of Delaware, Gold Reserve Ltd. presented a post-trial reply brief that supports its position based on four fundamental pillars:
OFAC sanctions block PDVSA 2020 bondholders
Gold Reserve firmly maintains that the existing sanctions regime from the U.S. Office of Foreign Assets Control (OFAC), specifically Executive Order (E.O.) 13835 and the ongoing suspension of General License 5 (GL-5), categorically prohibits PDVSA 2020 bondholders from exercising their rights to pledge on CITGO Holding shares, which includes voting to obstruct Gold Reserve/Dalinar Energy’s transaction. They refute the bondholders’ interpretations of OFAC’s guidelines (FAQs 1123 and 1124), asserting these only allow for rights preservation, not enforcement.
Section 324 mandates sale to the highest bidder
Gold Reserve points out that Delaware law, under Section 324, is clear and mandates the court to sell PDVH shares to the “highest bidder.” They claim their improved offer is the highest in terms of price and argue there is no legal precedent allowing the court to prioritize “certainty” over the highest price at the final stage of the CITGO auction, especially after the bids have been deemed compliant.
Strength of Gold Reserve/Dalinar Energy’s financing
Gold Reserve defended the structure and certainty of its financing and labeled criticisms from parties such as ConocoPhillips as misrepresentations. They clarified that the committed financing covered the entire purchase price, while additional funds were contingent to address a also contingent risk (the interference from PDVSA 2020 bondholders). They emphasized that the closing of the first phase of the transaction, which includes payment to primary creditors, is not conditioned on a subsequent merger with CITGO Petroleum.
Lack of competitive tension by the judicial expert
Gold Reserve heavily criticized the management of the sale process by the auction’s judicial expert, Robert B. Pincus, accusing him of failing to generate the “competitive tension” the court ordered. This is evident in the fact that the final bids did not significantly exceed the initial bid phase proposals and in the lack of clear guidance to bidders during the bid enhancement period.
OFAC sanctions on the CITGO auction
The brief notes that the prohibition under Executive Order 13835 and General License 5 (GL-5) in section 1(a)(iii) of E.O. 13835 forbids all “negotiations” with the PDVSA 2020 Bonds. Gold Reserve argues that exercising rights under the pledge agreement constitutes a “negotiation,” as it is a right bondholders would not have but for these bonds.
They reminded that E.O. 13835 was issued to sanction Nicolás Maduro’s regime for “endemic economic mismanagement and public corruption,” among other reasons. The PDVSA 2020 Bonds are seen as a tool that financed this regime.
According to Gold Reserve, OFAC issued GL-5 precisely because E.O. 13835 hindered the bondholders. GL-5 was created as an exception allowing them to access their collateral. However, this license was replaced, and its effectiveness suspended 19 times up until the date of the brief, with the latest extension through GL-5S until December 20, 2025.
Therefore, Gold Reserve concludes that as long as the suspension of GL-5 is in effect, PDVSA 2020 bondholders are prohibited from exercising their rights under the pledge.
Misinterpretation by PDVSA 2020 bondholders
Gold Reserve believes that PDVSA 2020 bondholders misinterpret two key OFAC guidelines:
• FAQ 1123: This guideline states that OFAC “is committed to fair and equitable treatment of potential creditors.” The 2020 bondholders use it to suggest that OFAC would not favor Gold Reserve, to which the company responds that this fairness policy does not nullify E.O. 13835. They argue that OFAC explicitly distinguished creditors due to expropriation (like Gold Reserve) from those who financed Maduro’s regime through “bonds and other securities,” which OFAC considers corrupt financing schemes.
• FAQ 1124: This guideline addresses how to “preserve or enforce” rights over the bonds. OFAC’s response indicates that “no enforcement actions will be taken against any person for taking steps to preserve the ability to enforce bondholders’ rights.” Gold Reserve emphasizes that this only allows for preservation, not enforcement, arguing that the bondholders’ interpretation would entirely nullify E.O. 13835 and the suspension of GL-5.
Gold Reserve argues that if PDVSA 2020 bondholders could indeed vote on the shares, they would have already done so to take control of CITGO Petroleum, change its board of directors, and force a payment or foreclosure sale. They added that the bondholders’ threat to seek an injunction to protect their collateral is a tacit admission of their inability to directly exercise voting rights.
Gold Reserve emphasized that the auction’s judicial expert and the court recognized that the risk for 2020 bondholders is contingent and depends on “OFAC lifting the suspension” of GL-5.
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