Gold Reserve files urgent motion over extended OFAC license tied to CITGO bondholder restrictions

Why did Gold Reserve file an emergency court motion about OFAC’s extension of General License 5S in the CITGO share sale process?

Gold Reserve Ltd. (TSX.V: GRZ; OTCQX: GDRZF), a Canada-based mineral exploration company, announced it has filed an emergency request with the U.S. District Court for the District of Delaware following the issuance of General License 5S by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). This license prolongs restrictions on the 2020 Bondholders’ ability to enforce pledges on shares in CITGO Holding Inc., a key U.S.-based asset indirectly controlled by Venezuela’s state-run oil company PDVSA.

The filing by Gold Reserve asks the court to formally seek clarification from OFAC about whether it intends to continue suspending the bondholders’ rights even after the completion of the long-anticipated sale of CITGO’s parent company shares held by PDV Holding Inc. (PDVH). The new extension, pushing the license’s expiration to December 20, 2025, arrives just weeks ahead of the court’s August 18 hearing date for the sale transaction.

Institutional investors following the asset recovery process interpret this move as a sign of lingering geopolitical and compliance sensitivities surrounding the enforcement of creditor rights involving Venezuelan-linked assets, especially those located in the United States.

What is the historical context behind OFAC license restrictions and Venezuela’s sovereign debt litigation in the United States?

OFAC first issued General License 5 in 2019 to prevent the enforcement of pledges tied to the 2020 bonds backed by CITGO shares, citing U.S. foreign policy and humanitarian considerations regarding Venezuela. Over time, the license has been revised and reissued, culminating most recently in General License 5S, which marks over five years of creditor limitations.

The background stems from Venezuela’s ongoing sovereign debt crisis and the 2018 arbitral award granted to Gold Reserve following the expropriation of its Brisas gold-copper project by the Venezuelan government in 2008. The award, amounting to over USD 700 million, was later recognized in a U.S. court judgment in 2015.

CITGO, one of the few attachable foreign assets of value owned indirectly by Venezuela, has been a focal point for a variety of creditors seeking to enforce legal claims, including Gold Reserve, Crystallex, and others.

How does OFAC’s latest action affect the timeline and structure of the Delaware court-supervised CITGO asset sale?

The issuance of General License 5S creates new uncertainty around the CITGO asset sale, which has been under judicial oversight through the Delaware court’s supervision of Crystallex International Corp. v. Bolivarian Republic of Venezuela (1:17-mc-00151-LPS). The court-appointed Special Master has been overseeing a structured bidding process to sell the PDVH shares, which indirectly control CITGO.

By extending the suspension of creditor enforcement actions to December 2025, OFAC has effectively signaled a preference for administrative control over how and when CITGO-related assets can be accessed by bondholders. Gold Reserve argues that while OFAC’s long-standing position on creditor restrictions is implicitly clear, an explicit confirmation—especially post-sale—would provide legal clarity that could enhance the asset’s auction value.

From an investor standpoint, any ambiguity in regulatory posture could dissuade prospective bidders or depress bid valuations. Institutions tracking the sale process view OFAC’s control as a central gating issue in determining how and when proceeds from the PDVH share sale could be distributed to claimants.

What are the risks and regulatory hurdles facing Gold Reserve’s participation in the CITGO share bidding process?

Gold Reserve has previously expressed its interest in participating in the bidding process for the PDVH shares. However, it faces several major constraints that may affect its ability to submit a competitive or qualifying bid.

These include the need to secure adequate equity or debt financing, obtain multiple regulatory approvals, and potentially navigate competing claims from other Venezuela-related creditors. Furthermore, the Special Master retains discretion to reject any bid at any stage of the process.

In its public statement, Gold Reserve noted a variety of contingencies that could disrupt its pursuit of the PDVH shares, including delays due to required reviews from OFAC, the Committee on Foreign Investment in the United States (CFIUS), the U.S. Federal Trade Commission, and the TSX Venture Exchange.

Analysts caution that while Gold Reserve remains a serious participant, the fragmented creditor landscape and the complexity of the legal and political terrain significantly reduce the predictability of any single claimant’s recovery prospects.

How are institutional investors responding to the OFAC license renewal and potential sale process delays?

Institutional sentiment around the CITGO sale process has shifted toward cautious neutrality following the extension of General License 5S. While the market previously anticipated a potential resolution by late 2025, OFAC’s move implies that strategic controls over Venezuelan-linked assets will likely remain in place well into 2026.

From a valuation perspective, the sale of PDVH shares is still considered the most viable pathway for partial creditor recovery. However, regulatory overhang and the threat of further political developments have cooled short-term enthusiasm.

Investors tracking arbitration-based recovery plays in the energy and mining sectors are reassessing timelines and risk-weighted returns. The fact that the U.S. government retains final discretion on enforcement outcomes underscores the geopolitical sensitivities surrounding PDVSA-linked assets.

What are the forward-looking implications for Gold Reserve’s sovereign recovery strategy and investor confidence?

Gold Reserve’s forward-looking strategy now hinges on three uncertain outcomes: whether its bid is deemed credible and competitive by the Special Master; whether regulatory agencies approve the sale and disbursement mechanisms; and whether competing creditor settlements dilute its recovery.

The Canadian mining firm emphasized in its recent disclosures that the proceeds from any future transaction may not be sufficient to satisfy its full arbitral award, especially considering accrued interest and legal costs. It also acknowledged that unexpected transaction-related costs, liabilities, or delays could arise from the ongoing sale process.

Looking ahead, analysts expect further legal filings and possible OFAC guidance before or around the August 2025 hearing date. Whether that clarification materializes could shape not only Gold Reserve’s prospects but the broader ecosystem of sovereign recovery cases tied to Venezuela’s international debt obligations.