The $30 Billion Identity Theft of Venezuela
How Juan Guaidó sucked a weary nation dry, and primed it for the current U.S.-led assault
by Maureen Tkacik November 26, 2025
In 2018, Henri Falcón tried to save Venezuela. As governor of the populous western state of Lara, Falcón had drawn overwhelming electoral victories and admiring profiles in the Western press for his humble demeanor, military precision, and reputation for finishing infrastructure projects on time and under budget. (“Efficient Revolution” was one of his campaign slogans.) But as oil prices and U.S. economic sanctions plunged the country into a harrowing depression, his ambitions grew humbler. “The overriding priority of my administration will be to make sure that not one Venezuelan child goes to bed without having eaten,” he wrote in a somber New York Times op-ed announcing his presidential candidacy.
Just before the op-ed went to press, Falcón was called to a meeting at the U.S. embassy, at which officials expressed their displeasure with him. The hard-right political parties that had plotted the failed but violent 2002 coup attempt against Hugo Chávez reacted to Nicolás Maduro’s first election with bloody riots, rolling blackouts, and a strategy of manufactured chaos. But the disgruntled aristocrats, living outside Venezuela while drawing generous salaries from USAID-funded NGOs, had decided to boycott the election, and believed everyone else should, too.
Falcón was incredulous: Replacing Maduro with a competent technocrat like himself was the rational way to save the economically ravaged country from the fate of Somalia or Haiti. But he was told that the White House saw the elections as by definition illegitimate, because the Supreme Court had banned the “most popular politicians” in the country from running. Participating in them was tantamount to collaboration with the Maduro regime. Should Falcón choose to go ahead with his candidacy anyway, they said, he should not be surprised to find himself and his immediate family members on an Office of Foreign Assets Control blacklist, which would effectively lock him out of the global financial system, a cruel irony given that a pillar of his platform was establishing a strict currency peg to the dollar.
In short, the State Department was threatening to financially destroy him—for running against Maduro.
Falcón soon learned he wasn’t the only one who had been summoned to the embassy for such a “talk.” While most opposition politicians grudgingly acceded to the boycott, they did so out of fear more than solidarity. The “popular politicians” banned from running, like Leopoldo López, Henrique Capriles, and María Corina Machado, had been implicated in plotting violent riots, industrial sabotage efforts, and military coups, things normie Venezuelans opposed. The idea behind the boycott was that opposition needed to have solidarity, but Venezuela-based opposition politicians like himself knew all too well solidarity was a one-way street with the Miami right wing.
In his Times column, Falcón framed his decision in Washington consensus logic: “A comprehensive Brookings study of 171 cases of boycotting around the world found that 96 percent of the time, the movements promoting the boycotts did not see positive results,” he wrote. But not in a million years could he have imagined how uniquely catastrophic the results would be.
At the time, Falcón’s opposition coalition (MUD) had controlled the Venezuelan legislature after a shock landslide election in 2015. The elections were preceded by a two-year campaign of weapons-grade State Department–funded psychological warfare, outlined in an astonishing July 2013 memo titled “Plan Estratégico Venezolano” (Venezuelan Strategic Plan) drafted under USAID supervision by a consortium of Colombian think tanks and a major American restructuring firm. The reality on the streets of Caracas reflected the memo’s orders to opposition coalition members to “maintain and increase acts of sabotage that affect services to the population, particularly the electrical system”; “increase problems with shortages of basic food items”; and “create crisis situations in the streets that facilitate U.S. and NATO intervention, with the support of the Colombian government. Whenever possible, the violence should result in deaths or injuries … [emphasis added]”
The victory was a turning point for Ricardo Hausmann, a pre-Chávez government economist who was at the time playing the part of a moderate, nonideological empiricist, working on growth projects in countries as diverse as Kazakhstan, Paraguay, South Africa, and Peru, and running an outfit called the Growth Lab for the Kennedy School’s Center for Economic Development. But he was married to an anti-Chávez hard-liner named Ana Julia Jatar, who worked for a Venezuelan nonprofit founded by Machado, this year’s Nobel Peace Prize winner, currently making the rounds claiming that Maduro is harboring Hamas militants. In 2006, Jatar even published a book, Apartheid in the 21st Century, depicting Venezuela’s public relations campaigns as a neo-segregationist system of oppression. (Notably, her father had written a book, Disabling the Extreme Left, about his experience “eliminating leftist groups” in Venezuela as an official in the ruling Acción Democrática party during the 1960s, according to the journalist Anya Parampil’s indispensable 2023 book Corporate Coup: Venezuela and the End of U.S. Empire.) The election win led Hausmann to wonder, “Why can’t Venezuela be a day job?”
The 2018 presidential election came and went. Voter turnout was 45 percent, the lowest in recent memory. Although one of the most respected pollsters in the country had predicted a seven-point loss for the Chavistas just months earlier, Maduro won by 55 points, Falcón became Walter Mondale, and his chief adviser Francisco Rodríguez returned to New York, where he served as chief economist for a small investment bank that specialized in Latin American debt. The MUD opposition coalition began purging supporters of Falcón and other candidates who had broken the boycott, many of whom were also sanctioned by the United States for their supposed collusion with the Maduro regime. “Opposition politicians,” Rodríguez later wrote, had become “more adept at lobbying Washington than doing the hard work of mobilizing voters to oppose Maduro.”
Hausmann confided to an audience convened by the World Affairs Council of Greater Houston on November 1, 2018, what the real plan was for Venezuela. “The international community is now focused on the idea that … January 10 [2019] is the end of the presidential period of Nicolás Maduro.”
IAN BRODIE WAS A VANCOUVER PENNY STOCK PROMOTER who specialized in acquiring controlling stakes in obscure publicly traded companies, starting rumors of some major deal in the works, then dumping the stock after the inevitable share price run-up. At some point in the late 1980s, Brodie acquired control of Petroflame International, named himself CEO, and announced it had acquired mineral rights to the world’s largest untapped gold mine, near Venezuela’s border with Guyana. In fact, Petroflame had purchased something purporting to be the rights to mine gold from an unscrupulous miner who had in turn bought them from an unscrupulous lawyer who had expropriated them from a childless widow client who had proceeded to die without clearly willing the mine to anybody.
The stock went wild, only to fall back to Earth when the Vancouver mining giant Placer Dome announced it would be developing the same site in a joint venture with the Venezuelan government, and the Venezuela Supreme Court issued a judgment decreeing Petroflame’s ownership claim so dubious as to be unworthy of discovery—by which point, Brodie was long gone and Petroflame had changed its name to Crystallex.
Undeterred, Crystallex litigated its Hail Mary claim with Placer Dome and Venezuela for nearly two decades, while raining down extravagant compensation on far-flung executives with dubious résumés. In 1998, following a congressional investigation, bribery accusations, and a series of fascinating investigations in the National Post, Venezuela’s Supreme Court once again ordered Crystallex to cease and desist, with an influential congressman telling reporters: “This is the plain simple truth: Crystallex does not have the rights it is claiming and which it is telling investors it had.” But following Hugo Chávez’s election, the passage of new mining legislation, and a slide in gold prices, Crystallex won a contract to develop the mine in 2002. It embarked on a series of feasibility studies, photo ops, and new litigation battles culminating in a bond issuance to finance the project—at which point the Chávez government unilaterally called the whole thing off, citing the company’s long history of delays and violations of worker rights and environmental laws, but most importantly for legal purposes, the necessity to preserve state ownership of vital resources during periods of financial turmoil, such as the unprecedented credit crunch that paralyzed global financial markets in 2008.
A shrewder team of lawyers would doubtless have handled Crystallex differently. Team Chávez might have made the case that Crystallex, in all its chicanery and glacial progress, had forced the government’s hand, and coughed up a substantial enough settlement to avoid the inevitable litigation. But the timing could not have been worse: The oil prices that determined Venezuela’s solvency went into free fall during the fall of 2008, collapsing to $35 a barrel from $150 earlier that year.
Crystallex filed for Chapter 15 protection in Delaware, after negotiating a bankruptcy loan with a newly founded “special situations” hedge fund called Tenor Capital Management. In exchange for paying the requisite battalion of top-shelf lawyers and consultants, Tenor negotiated a majority stake in Crystallex’s claim against the Venezuelan government and began to assemble a legal team to argue its case before the International Centre for Settlement of Investment Disputes, a World Bank court based in Washington. Although Crystallex had only spent roughly $100 million developing the mine, Tenor sued Venezuela for $3.6 billion, and in 2016 a panel of three judges awarded Crystallex $1.2 billion, plus interest and fees.
That’s where Tenor got clever. Elliott Investment Management had rewritten the rules of international hedge fund assholery in 2012, when it convinced the Ghanaian government to seize an Argentine navy frigate that had docked in one of its ports—with more than 250 sailors aboard—to settle a decade-old dispute over defaulted bonds it had scooped up for pennies on the dollar. An international court ultimately deemed the seizure illegal, but four years later Argentina’s neoliberal president finally forked over $2.4 billion it didn’t have to settle the dispute.
Hoping a similar gambit would expedite Venezuela’s settlement, Tenor sued Citgo, the Texas refining giant Venezuela’s state-owned oil company had owned since 1991, quite famously to Americans in states where the company supplied free and subsidized heating oil to homeless shelters and low-income city dwellers during the Chávez years. It was a far bigger Hail Mary than the Argentine frigate, since Citgo wasn’t directly owned by the Venezuelan government, but by a holding company that was in turn owned by the Venezuelan state-owned oil company PDVSA, which like dozens of other state-owned oil companies from Malaysia to Qatar was legally distinct from the Venezuelan government in innumerable ways codified under American law.
But an economist and lawyer named José Ignacio Hernández argued otherwise. The Caracas professor had carved out a niche for himself as an expert in the nuances and loopholes of Venezuelan administrative law. In 2017, Hernández was recruited by none other than Ricardo Hausmann to be a fellow at the Growth Lab at Harvard’s Kennedy School. Together, they would preside over one of the most horrific periods of negative economic growth in world history.
IN A SWORN DECLARATION IN APRIL 2017, Hernández argued that PDVSA and any and all subsidiaries and offshoots were “alter egos” of the Venezuelan government itself. He cited the government connections of most PDVSA board members, the use of PDVSA’s surpluses to fund social spending programs, and the periodic purges of Citgo executives and workers who were disloyal to the government—though not the participation of said purged executives and workers in the 2002 coup that briefly replaced Chávez with the Chamber of Commerce president—to make his case. In another filing in November, he argued that the various ministries and institutions of the Venezuelan government did not have distinct “legal personalities” under the Venezuelan constitution, and should instead be seen as “subdivisions of Venezuela.”
Delaware federal judge Leonard Stark was persuaded: In an unusual 76-page opinion regurgitating many of Hernández’s arguments, he ordered the sale of Citgo to pay off Venezuela’s debt to Crystallex. Venezuela’s lawyers quickly appealed the ruling, wiring $500 million to Crystallex and another $950 million to PDVSA’s bondholders around the same time just to underline their seriousness. They had ample reason to believe they would ultimately prevail.
But then came the day Hausmann had teased his audience in Houston about: the January 10, 2019, meeting of the Organization of American States, at which the Permanent Council passed a resolution refusing to recognize Maduro as the legitimate president of Venezuela, on the premise that the 2018 election—which the opposition had boycotted and the OAS had declined multiple invitations to monitor—had been fraudulent. Earlier that week, a tall, youthful engineer named Juan Guaidó had been sworn in as the new leader of the National Assembly with a fiery speech about how he planned to rescue the country from Maduro. No one had heard of Guaidó; a former PDVSA engineer and opposition activist named Jorge Alejandro Rodríguez told the Prospect he was initially hopeful upon hearing the speech, then skeptical after his daughter asked how it could be that the new leader of the legislature had just 1,200 followers on Instagram.
But what Juan Guaidó lacked in social media friends he more than made up for in friends in high places. On January 23, 2019, when Guaidó proclaimed himself the “interim president” of an incredulous Venezuela, Secretary of State Mike Pompeo announced that the Trump administration would recognize Guaidó as the Bolivarian Republic’s genuine leader, and unveiled a suite of tough new sanctions on PDVSA, pitched as a bid to force Maduro to step down. The whole thing seemed like a joke, a throwback to the days when our foreign-policy establishment insisted a drug-trafficking warlord on an island of six million was the “real” leader of the world’s most populous country—though at least most Chinese knew who Chiang Kai-shek was when he fled to Taiwan in 1949 to preside over what the United Nations insisted on calling the “Republic of China.” Only the Miami Herald noted an unusual provision of the new arrangement, explained by then-Treasury Secretary Steve Mnuchin, who told the newspaper “that if Guaidó succeeds in forming a government, the money” from international sales of Venezuelan oil that he was freezing under the new sanctions regime “would go to him.” On Twitter, Guaidó promised this new arrangement would “prevent the looting from continuing.”
But Francisco Rodríguez began to feel a sinking sensation that the looting had just begun. As a self-taught expert on the nuances of “alter ego” law after years in the trenches of the Venezuelan bond market, he believed the country would ultimately prevail in its assertion that Venezuela, PDVSA, and Citgo were legally separate entities. But in mid-February, Guaidó named entirely new slates of board members to PDVSA, its U.S. holding company, and Citgo, a move Rodríguez knew would strengthen Crystallex’s case. That same week, the glass manufacturer Owens-Illinois, which had been awarded a half-billion-dollar arbitration judgment over two Coke bottle factories Chávez had expropriated in 2010, sued Citgo on the basis that it was an “alter ego” of the state. Owens-Illinois had expert witness assistance from none other than José Ignacio Hernández, whom Guaidó had just named the attorney general of the shadow government.
“I said to myself, this is a disaster,” Francisco Rodríguez remembers. “I called my friends in the opposition and said, ‘Look, you guys messed up, you shouldn’t have done this, my advice is you correct this as soon as possible because the country could lose billions of dollars because of this.’ And they said, ‘Thanks for letting us know, we knew nothing about this, we’re gonna do something about it.’ And then a few hours later they call me back and say, ‘We can’t do anything about it, this is coming from Guaidó, the whole legal strategy is being designed by Hernández and it’s a perfect legal strategy.’”
Jorge Alejandro Rodríguez, who belonged to the moderate opposition that had rallied in vain around Falcón’s presidential bid, separately tried to sound the alarm with some legislators from Guaidó’s party. During a June 5 meeting, he “told the lawmakers: ‘I don’t give this [case] more than a couple of months … once you see the case and the things that Hernández did … you can see that it was of such a benefit to Crystallex, that for the judges it became a clear case.”
But his warnings fell on deaf ears. Hernández issued a memorandum, co-authored with Hausmann and some other Guaidó appointees, containing preliminary guidelines for a planned restructuring of Venezuelan debt. In a section headed “Equal Treatment,” the memo stated: “[N]o different treatment shall be accorded to eligible foreign currency-denominated claims as a result of their origin (for example, whether arising pursuant to a debt instrument, an unpaid invoice, an expropriation, etc.), the nature or domicile of the holder of the claim, and/or the identity of the public sector obligor (the Republic, PDVSA or another public sector entity, whether the claim has been reduced to a court judgment or otherwise.”
This was unambiguous “proof” that Citgo, PDVSA, and Venezuela were one and the same, as a long list of international creditors well understood. (It was also some Banana Republic shit: equal treatment of all claims related to entities connected to the Venezuelan government, no matter which entity had incurred the debt? The bonds had paid different interest rates, and now that they were in default, traded at different prices.) Most surreally, Citgo had not been so thoroughly cut off from Venezuela since the 1980s, as Team Guaidó had blocked PDVSA’s oil tankers from entering its ports and terminated the company’s email contact with its parent in “compliance” with Trump’s sanctions. Citgo was forced to spend hundreds of millions of dollars retrofitting its facilities to refine lighter oils than the Venezuelan heavy crude for which they had been designed, and Venezuela lost 1.34 million barrels per day in refining capacity overnight. After consulting with some Trump administration contacts, Jorge Rodríguez quickly tapped out the first of what would ultimately become a string of formal complaints piecing together Hernández’s scheme as he understood it, and submitted it to the Foreign Corrupt Practices Act enforcement desk of the Justice Department.
By that time, Trump had taken to calling Juan Guaidó “the Beto O’Rourke of Venezuela” behind closed doors, having generally bored of the quest to unseat Maduro, for whom he had developed a grudging respect. While variously depicted as a bus driver with delusions of grandeur and “Stalin of the Caribbean” by the Western media, Maduro is understood by everyone who knows him as a pragmatic negotiator, always on the lookout for a deal. In 2017, he summoned the elusive billionaire Harry Sargeant III, a former fighter pilot with a family asphalt business that had sourced crude oil in Venezuela since the 1980s, to rehabilitate three oil fields that had been destroyed by years of abandonment and vandalism, in a last-ditch effort to ward off famine. Sargeant, a longtime Mar-a-Lago member who had bundled donations for the Florida Republican Party for decades and plays golf with the president on a near-weekly basis, began in turn to nudge Trump and administration insiders, from Lev Parnas during the first Trump administration to Laura Loomer today, to make deals, not war. The Pentagon convened a collection of insiders and consensus-friendly regime change wonks like Douglas Farah to conduct a “war game” that projected the overthrow of Maduro would result in chaos and civil war.
“We were always fearful that he would want to exercise [the] option” of meeting Maduro face-to-face, a former Trump aide told The New York Times in 2020; the president had first floated the idea himself back in 2017 during a meeting widely depicted in the media as the time Trump suggested invading Venezuela. But the regime change lobby was simply too entrenched, as former NSC official Fernando Cutz semi-intentionally conceded in the process of explaining that the administration’s Venezuela policy had been designed to appeal to “swing voters in Florida”—not a swing state. “Maduro filled a hole that had been missing in the lives of a lot of these Florida reactionaries,” explains a money manager who has lobbied the administration on Venezuela policy. “They needed a villain, and he became their new Castro.”
The $30 Billion Identity Theft of Venezuela - The American Prospect
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