(Bloomberg) -- New York hedge fund Tenor Capital Management is set for a big payout after investing in a gold miner expropriated by Venezuela that’s now first in line for a $1.4 billion settlement.

Tenor helped finance Crystallex International Corp.’s litigation for the past decade in hopes of one day receiving an undisclosed portion of any award the Canadian gold miner won in challenging the late Hugo Chavez’s 2011 decision to revoke its license for one of the world’s largest gold deposits. 

Now, a US judge has put Crystallex at the front of a long line of Venezuela’s creditors when shares in Venezuelan refiner Citgo Petroleum Corp.’s parent company are sold at an auction scheduled to begin next month.

Crystallex, which was seized by the government before ever mining gold in Venezuela, is among more than a dozen other creditors with claims in excess of $5 billion, including German chemical maker Siemens AG and US oil producer ConocoPhillips. US District Judge Leonard Stark used a first-come, first-served approach that favored creditors like Crystallex, who filed their claims ahead of others such as Conoco and Owens-Illinois Group Inc.’s OI European. 

Hedge funds, private equity and sovereign wealth funds have been piling billions into the outcome of high stakes court cases while aiming for big payouts. Litigation finance, which sees outside investors pool money into lawsuits in exchange for a portion of any award, is a nascent but growing $13.5 billion industry. 

Tenor extended an initial $36 million debtor-in-possession financing to bankrupt Crystallex in 2012 for the prosecution of its claim against the Venezuelan government, according to court documents. The loans jumped to a total of $75.8 million as of 2017. 

As of 2014, Tenor had rights to 70.5% of the net proceeds — based on loans totaling $62.5 million at the time — after taxes and payment to creditors. It also got to appoint two members of the company’s board, including founding partner Robin Shah. 

Shah didn’t respond to requests for comment. A representative for Crystallex declined to specify the share of the award currently earmarked for Tenor. 

Read more: Litigation Funders See Growing Opportunities in Bankruptcy Boom

Complex international arbitration cases are “definitely on the riskier end,” Luke Darkow, a principal at Chicago-based Victory Park Capital Advisors, said in an interview. “You’re backing a single case outcome, duration is notoriously difficult to underwrite and is almost always extended.”

Timing of any payout is still uncertain as the government of Nicolas Maduro, who succeeded Chavez after his death in 2013, attempts to delay the auction process.

Little-known Crystallex and Venezuela signed an agreement in 2002 to exploit a nearly 4,000-hectare gold deposit known as Las Cristinas in the Amazon basin. The company didn’t receive the environmental permit it needed to start production despite mapping, exploring, drilling the area and spending more than $500 million developing the land for three years. 

While waiting for the permit, Chavez’s government ordered Crystallex’s contract to be unilaterally terminated and turned it over to the state-owned oil company Petroleos de Venezuela SA, or PDVSA. Lawyers for the mining firm won the $1.2 billion arbitration award in 2016, which has since grown to $1.4 billion with interest.

Since Venezuela had already paid some money to bring down the judgment, Stark said the current balance owed to Crystallex is about $970 million. 

Nowadays, what is left of Las Cristinas is artisanally mined by locals in one of Venezuela’s poorest — and most dangerous — areas, overrun by violent gangs and factions of Colombia’s guerrilla forces. Mercury poisoning runs rampant as miners use it to extract gold from ore in a process that can create toxic vapors that are inhaled or leach into water sources.

The case is Crystallex International Corp. v. Bolivarian Republic of Venezuela, 17-mc-00151, U.S. District Court, District of Delaware (Wilmington).

--With assistance from Nicolle Yapur.

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