Crystallex Enforcement Moving Forward With Ofac Support

Natalie Shkolnik and Michael Van Riper

May 18, 2023

Back in March 2022, the Delaware federal district court in the matter of Crystallex International Corporation v. Bolivarian Republic of Venezuela entered an opinion approving the sale at auction of Petroleos de Venezuela, S.A.’s shares in PDV Holding, Inc. – and with them control of CITGO. Proceeds of the sale would then be applied to satisfy Crystallex’s judgment against Venezuela, as well as – potentially – Venezuela’s other judgment creditors.

Realizing that the absence of a license permitting the auction and sale from the Office of Foreign Assets Control would severely depress any bidding, the court’s opinion and subsequent order authorized a six‑month window in which the court-appointed Special Master would “attempt to obtain greater clarity from OFAC, in a form he can share with the market, of its support for (or at least non-opposition to), the sale process.”

Although subsequent developments would delay the opening of this window until October 2022, the Special Master’s efforts have finally born fruit. According to the Special Master’s most recent report to the Court, the United States Government has issued a letter explaining that – while it “will require due diligence about the identity of a potential

purchaser and will consider relevant details of the proposed transaction” prior to approving the sale – it “will not take enforcement action against individuals or entities for participating in” the auction.

Strikingly, the letter also declares OFAC’s intent “to implement a favorable licensing policy for license applications in connection with the execution of a sale” or “negotiation of a settlement agreement among the relevant parties.”  In our view, this statement is as clear a signal as the Government could reasonably provide prior to bidding and due diligence that it will indeed authorize the final sale or an agreed disposition of the shares.  The question remains how long that final authorization will take.

Crystallex just took a big step forward. Next comes a new round of litigation over which other creditors might participate in the sale proceeds and in what order of priority.

If you have any questions or would like to discuss this further, please reach out to Natalie Shkolnik at (212) 981-2294, or Michael Van Riper at (212) 421-2902,