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A Delaware federal judge has allowed Crystallex International Corp. to begin seizing shares of Citgo Petroleum Corp., as the Canadian gold mining and exploration firm looks to collect a $1.2 billion judgment against the Venezuelan government.

U.S. Chief Judge Leonard P. Stark of the District of Delaware on Thursday ordered that the U.S. Marshals Service start the sale process after he earlier this month granted the Canadian company's bid to prevent Venezuela from avoiding an arbitration award over lost mineral rights.

In an eight-page order, Stark said Citgo's U.S.-based parent, PDV Holding Inc., would be sold at auction unless Venezuela posts a bond. However, the sale would not begin immediately, pending a court-issued order of sale, Stark said.

Thursday's order capped a week of letter briefing on how to proceed in the case after Stark on Aug. 9 ruled that Venezuela's national oil company, Petróleos de Venezuela S.A. was an “alter ego” of the Venezuelan government. That ruling found that Venezuela's national oil company, Petróleos de Venezuela S.A.—which owns Citgo in the United States—was an “alter ego” of the Venezuelan government and that shares it owns in PDVH were subject to a writ of attachment.

PDVSA, which had intervened in the suit against Venezuela, is appealing the ruling.

On Thursday, Stark said that he still had authority to enforce the Aug. 9 order, despite the appeal, but he said the sale itself would not be finalized until any additional parties are given the chance to intervene.

Stark did not specify the amount of the bond Venezuela would be required to post in order to hold onto PDVH, one of its last remaining sources of oil revenue. The South American country is becoming increasingly strapped for cash and is in default on $6 billion in debt.

Crystallex filed its motion for a writ of attachment in August 2017, after Venezuela failed to pay a $1.2 billion arbitration award for improperly terminating the Canadian company's rights to an untapped gold reserve amid a push to nationalize its gold mines.

The U.S. District Court for the District of Columbia confirmed the arbitration award in 2017. However, Crystallex's previous attempt to recover against PDVSA under the Delaware Uniform Fraudulent Transfer Act fell flat after an appeals court tossed the case in January.

PDVSA intervened in the dispute and argued that Venezuela's control of PDVSA and its assets constituted ordinary government regulations. According to PDVSA, shares in the American subsidiary were “effectively frozen” and couldn't be used for commercial activity.

Stark, however, sided with Crystallex, citing evidence that Venezuela was deeply involved in the day-to-day operations of PDVSA.

“Specifically, Venezuela—through PDVSA—uses the shares to appoint directors, approve contracts and pledge assets as security for PDVSA's debt,” he wrote on Aug. 9.

“The court finds by a preponderance of evidence that the PDVH shares are being 'used for a commercial purpose' by PDVSA and, therefore, may be attached (and executed on) as property of Venezuela's alter ego.”

Crystallex is represented by Robert L. Weigel, Jason W. Myatt, Rahim Moloo and Miguel A. Estrada of Gibson, Dunn & Crutcher's New York and Washington, D.C., offices. Raymond J. DiCamillo, Jeffrey L. Moyer and Travis S. Hunter of Richards, Layton & Finger are acting as local counsel.

PDVSA is represented by Joseph D. Pizzurro, Kevin A. Meehan, Julia B. Mosse and Juan Perla of Curtis, Mallet-Prevost, Colt & Mosle in New York and Samuel T. Hirzel II of Heyman Enerio Gattuso & Hirzel in Wilmington.

The case is captioned Crystallex International v. Venezuela.