The CITGO auction continues to face complications, as Gold Reserve seeks clarification from OFAC regarding General License (GL) No. 5S for holders of PDVSA 2020 Bonds. Judicial expert Robert Pincus opts to refrain from giving an opinion, and bondholders assert that no sanctions can restrict their rights.
Gold Reserve emphasizes the need to maximize the value of the CITGO auction for creditors with attached judgments, rather than disproportionately benefitting holders of 2020 Bonds, whose risk and influence have been lessened by OFAC’s ongoing actions. They believe that the “competition” among bidders to reach an agreement with 2020 bondholders could divert funds from legitimate creditors.
Given OFAC’s previous refusal to respond, judicial expert for the CITGO auction, Robert Pincus, has chosen not to take a side regarding Gold Reserve’s request, stating that it will not affect his final decision.
Meanwhile, holders of PDVSA 2020 Bonds rebut Gold Reserve’s claim, asserting that no sanctions limit their ability to protect their rights, including legal action or governance determination for CITGO. They argue that Gold Reserve significantly misinterprets the legal implications of OFAC’s actions and intentions regarding creditor rights and the prioritization of claims.
Gold Reserve’s Emergency Request
In the CITGO auction, Gold Reserve seeks clarification from OFAC regarding its license.
On June 23, 2024, Gold Reserve filed a motion in the U.S. District Court for the District of Delaware asking the Office of Foreign Assets Control (OFAC) to clarify whether it will continue suspending GL-5 beyond the CITGO auction closing date through the sale of PDVH shares.
OFAC issued General License (GL) No. 5S, which suspends the rights of 2020 Bondholders for six months—from July 3, 2025, to December 20, 2025—leading Gold Reserve to request Judge Leonard P. Stark to urge the Treasury Department agency to clarify in order to optimize the sale process and prevent fundamental injustice in fund distribution.
The request argues that this extended period—the nineteenth in over five years—alleviates the risk posed by these bondholders, removing the justification for an agreement that could divert billions from Judgment Creditors. They believe that the suspension should fundamentally affect the CITGO auction, particularly regarding offer valuations and the need for an agreement with those bondholders.
This extension is “twice the length of the usual three-month OFAC extensions and 50% longer than the previous four-month extension.” The original suspension of GL-5 was implemented in October 2019 and has been extended nineteen times in over five years. Gold Reserve suggests that the duration of this extension is sufficient to cover a realistic early closing date for the Sale Transaction.
Implications for Risk Associated with Bondholders
Gold Reserve believes that the issuance of the license indicates that OFAC “intends to continue suspending GL-5 beyond the expected closing date of the sale of PDVH shares.”
The company views this as “definitive proof” that 2020 Bondholders “have not persuaded OFAC to change its position, which it has consistently adhered to for over five years.”
Gold Reserve argues that the issuance of GL-5S “substantially reduces, if not completely eliminates, the supposed ‘risk’ posed by the 2020 Bondholders and thus the justification for attributing value to a settlement with the 2020 Bondholders that would divert billions from Judgment Creditors.”
Impact on the CITGO Auction and Court Objectives
Gold Reserve asserts that more guidance from OFAC could “fundamentally impact the Sale Process,” including the preparation of final bids by bidders, the judicial expert’s final recommendations, objections, discovery, and litigation, as well as the preparation of higher bids.
Proceeding with the final stages of the CITGO auction without clarification from OFAC is “inefficient and counterproductive.” Understanding the agency’s intentions would increase the likelihood of achieving the court’s objectives set in its April 21, 2025, Order, which include:
Eviting that the bidding period becomes “a competition among bidders to reach an agreement with the 2020 Bondholders, instead of enhancing bids to satisfy the judgments of Additional Creditors.”
Ensuring that final bids meet “a price equal to or greater than that associated with the Consortium’s offer.”
Avoiding “fundamental injustice” if a Final Offer is rejected because it valued the settlement with the 2020 Bondholders, and later events (such as OFAC indicating the continuation of the GL-5 suspension) reveal that closing with such an offer would be unjust, especially when offers with much higher purchase prices were rejected.
Robert Pincus Abstains from Taking a Side
On June 25, 2025, judicial expert Robert Pincus informed Judge Leonard Stark that, since OFAC has previously denied guidance, he refrains from taking a side on Gold Reserve’s request due to the negative impact on the sale’s timeline.
He noted that this would delay the ongoing CITGO auction, which has imminent deadlines for finalizing bids and selecting a proposal. However, Pincus emphasizes that this guidance “likely would not be decisive for his recommendation in any case.” This suggests that while OFAC’s information would be welcomed, it would not fundamentally alter his decision-making process.
It has been indicated that the judicial expert previously requested this guidance from OFAC during the topping period, and they “refused to provide it.” Therefore, Pincus “has no reason to believe that OFAC is likely to provide any guidance at this point in the sale process.”
Time Impact on Gold Reserve’s Request
Robert Pincus emphasizes that due to the “timing of Gold Reserve’s request for guidance from OFAC, it is not reasonably possible for them to provide any guidance that could be considered by the Special Master when selecting a higher bid without further delaying the sale process.”
The judicial expert has until the end of today, June 25, 2025, to rescind the Stock Purchase Agreement with Red Tree Acquisitions, LLC, with the aim of making a superior proposal. After this date, a “No-Buy Period” begins during which Pincus must cease negotiations with potential competing bidders.
Robert Pincus instructed bidders to submit their final revisions by the morning of June 25, 2025, in order to make an informed decision before the deadline. He is expected to present an executed Stock Purchase Agreement and a final recommendation by July 2, 2025.
Due to these time constraints and OFAC’s previous unwillingness to provide guidance, the judicial expert “does not believe that such a delay is justified.” Pincus does not formally support or oppose the request, but considers it unfeasible given the current circumstances.
Response from PDVSA 2020 Bondholders
On June 24, 2025, the firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, representing the PDVSA 2020 Bondholders, sent a communication to Judge Leonard P. Stark refuting claims made by Gold Reserve.
The bondholders argue that neither GL-5S nor any existing sanctions restrict their ability to protect their rights, including initiating legal actions or determining governance for CITGO. They also question Gold Reserve’s interpretation of the extensions of GL-5S, deeming it baseless speculation.
The bondholders emphasize that OFAC does not intend to favor one group of creditors over another, maintaining fair treatment. They find no need to seek additional guidance from OFAC, although they do not oppose it if the court deems it appropriate.
Bondholders: Gold Reserve’s Misleading Statements
The holders of PDVSA 2020 Bonds deny Gold Reserve’s claim about the impact of GL-5S on the risk and valuation of the Issuance Contract and Pledge Agreement, even through injunction procedures or to determine appropriate governance at CITGO Holding or CITGO Petroleum.
“No specific license from OFAC is required to initiate or continue legal proceedings in the U.S. against a designated or blocked person under Venezuela Sanctions Regulations (…), or for a U.S. court, or its staff, to take cognizance of such a case. Similarly, creditors can seek liens without OFAC authorization for matters involving blocked assets under the VSR,” they maintain.
They remind that OFAC expressly stated it “will not take coercive action against any person for taking steps to preserve the ability to enforce the rights of bondholders over the CITGO shares that serve as collateral for the 8.5 percent PdVSA 2020 bond.”
They assert their full right to continue with their litigation and obtain injunctions to protect their rights over the collateral, warning that if the judicial expert recommends a transaction that violates their rights, it will be subject to litigation and is extremely unlikely to close.
The bondholders label Gold Reserve’s position as “wild and unfounded speculation” and a “misleading characterization of the facts.” They point out that six-month extensions are not unusual, as GL-5F also had that duration. In fact, there have been year-long extensions, such as GL-5I, and four-month extensions, namely GL-5O, GL-5Q, and GL-5R.
They emphasize that the timing of the issuance of GL-5S—thirteen days before—is also not atypical, given that OFAC has issued licenses with greater advance notice in the past; for example, GL-5H occurred 41 days prior.
The holders of PDVSA 2020 Bonds assert that OFAC does not intend to favor one group of creditors over another, as Gold Reserve suggests, since the Treasury Department “has made it clear repeatedly” that it has no such purpose.