In a landmark ruling that shakes the financial foundations of Nicolás Maduro’s regime, federal judge Katherine Polk Failla of the Southern District of New York (SDNY) ordered Petróleos de Venezuela S.A. (PDVSA) to pay $2.86 billion to holders of the defaulted PDVSA 2020 bonds. This amount includes $2.25 billion in principal plus accumulated interest, which has reached over $609,000 daily since the default in 2019.
This ruling, issued on October 17, 2025, confirms the validity of the bonds under Venezuelan law and marks a new chapter in the prolonged international legal battle over Venezuela’s assets, including Citgo Petroleum, the U.S. subsidiary of PDVSA, which is the main source of foreign currency income for the country.
Background of the Case
The PDVSA 2020 bonds were issued in September 2016 as part of a debt swap to defer payments on bonds maturing in 2017. The bonds, with a nominal value of $2.8 billion, were secured by 50.1% of Citgo Holding Inc. shares, the parent company of Citgo Petroleum, valued between $13 and $20 billion.
In 2019, following the imposition of U.S. sanctions on PDVSA, the Ad Hoc Board of PDVSA, established by the Venezuelan opposition and recognized by Washington as an interim government, questioned the validity of the bonds, claiming they lacked approval from the 2015 National Assembly, a constitutional requirement for “public interest” contracts.
Key Previous Litigations
October 2020: Judge Failla initially rules in favor of the bondholders, awarding $1.9 billion. PDVSA appeals.
February 2024: The New York Court of Appeals confirms that validity must be assessed under Venezuelan law.
July 2024: The Second Circuit partially reverses and returns the case to Failla.
June 2023: Bondholders argue that the lack of parliamentary approval does not invalidate the bonds under Venezuelan law.
Meanwhile, in Delaware, a court ordered the auction of Citgo in 2022 to pay Venezuelan debts exceeding $20 billion, with claims from Crystallex, ConocoPhillips, and Tidewater. Companies like Amber Energy and Gold Reserve are bidding for the U.S. subsidiary.
Details of the October 17, 2025 Ruling
Total Amount: $2.86 billion (principal + interest)
Outstanding Principal: $2.25 billion
Accumulated Interest: $609,000+ daily since 2019
Collateral: 50.1% of Citgo Holding shares
Plaintiffs: MUFG Union Bank (trustee), GLAS Americas (collateral agent)
Defendant: PDVSA and PDVH (subsidiary)
Pending Appeal: Second Circuit
Judge Failla dismissed that the bonds were “void ab initio” due to lack of parliamentary approval, arguing that only contracts signed directly by the Republic require such authorization. Additionally, she dismissed PDVSA’s countersuit against MUFG and GLAS.
Bondholders can enforce the guarantee over Citgo, although U.S. sanctions limit actions until the Delaware auction is resolved. Interest continues to accumulate at a rate of more than $609,000 daily.
Financial and Legal Implications
For Venezuela and PDVSA:
Intensifies the debt crisis, which ranges between $60 billion and $125 billion.
Could force negotiations or asset sales, although sanctions limit payments.
The opposition views Citgo as “the crown jewel” and warns of the risks of loss.
For Citgo and the Delaware Auction:
Favors the bid from Amber Energy ($5.9 billion), which includes $2.1 billion for PDVSA bondholders.
The auction could close in 2026, prioritizing creditor claims, including Crystallex ($1 billion).
Financial Market:
PDVSA bonds increased from 10-11 cents to 18 cents per dollar since 2023.
The decision generates greater confidence in recovery, although volatility persists due to U.S.-Venezuela politics.
Legal Risks:
PDVSA will appeal under the “act of state doctrine.”
Experts consider the risk of reversal low, but it could delay enforcement.
The ruling by Judge Failla marks a milestone in Venezuela’s financial history: it affirms the validity of the PDVSA 2020 bonds, accelerates the possibility of enforcing guarantees over Citgo, and highlights the complex issues surrounding sanctions, international litigation, and Venezuelan debt. This legal chapter not only impacts PDVSA’s finances but also redefines the strategy for creditors, the future of Citgo, and the delicate balance between national sovereignty and international obligations.
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Judge Katherine Polk Failla of the SDNY orders PDVSA to pay $2.86 billion to 2020 bondholders, including principal and accrued interest since 2019. The ruling strengthens the auction of Citgo, impacts Venezuelan debt, and limits PDVSA’s actions due to U.S. sanctions.
PDVSA, PDVSA 2020 bonds, New York court ruling, Venezuelan debt, Citgo Petroleum, Katherine Polk Failla, SDNY court, accrued interest, financial crisis Venezuela, U.S. sanctions, Citgo auction, Amber Energy, Elliott Investment Management, Gold Reserve, Crystallex, ConocoPhillips, Tidewater, Ad Hoc Board PDVSA, payment bonds Venezuela, PDVSA default 2019, Venezuelan assets in the U.S., international courts, financial law
Katherine Polk Failla, Nicolás Maduro, Juan Guaidó, María Corina Machado
Companies / Institutions: PDVSA, PDVH, MUFG Union Bank, GLAS Americas, Citgo Petroleum, Citgo Holding Inc., Amber Energy, Elliott Investment Management, Gold Reserve, Crystallex, ConocoPhillips, Tidewater
Courts / Regulations: Southern District Court of New York (SDNY), Second Circuit, Delaware Court, OFAC, Uniform Commercial Code of New York (UCC § 8-110), Venezuelan law
Locations: New York, Delaware, Venezuela, United States
Other key terms: 2020 bonds, accrued interest, sovereign debt, Citgo auction, PDVSA default, Venezuelan financial crisis