The 49-year-old actor exited the project just days before the film was set to start shooting on location in Guadalajara, Mexico and the future of the movie is said to be in doubt as it reportedly hinged on Phoenix's casting - now Christine Vachon - who works for Killer Films - has admitted it's been a very difficult time.
In a post on Facebook, she shared and article about the drama and wrote: "A version of this did happen. It has been a nightmare. If I haven't been in touch or returned your call - this is why."
She went on to ask followers not to criticise producers for hiring a straight actor to play a gay role - insisting the movie was Phoenix's passion project.
Christine added: "And please if you are tempted to finger wag or admonish us that 'that's what you get for casting a straight actor' - DON'T.
"This was HIS project that he brought to US - and Killer's record on working with LGBTQ actors/crew/directors speaks for itself. (and for those of you who HAVE - know that you are making a terrible situation even worse)."
'Top Gun: Maverick' actor Danny Ramirez, 31, had been cast opposite Phoenix in the movie, about two lovers who leave California for Mexico. The film was said to be rated NC-17 and feature a relationship that will "challenge" audiences.
Entire sets had been built on location prior to Phoenix's exit and there has been speculation the collapse of the project could lead to millions of dollars in losses.
A source told Variety: "The project is in peril... The crew is now out of work, and stakeholders in the film still need to be paid. Losses could exceed seven figures."
Director Haynes previously opened up about Phoenix's plan for the movie revealing the actor was keen to push it "further into more dangerous territory, sexually".
He told Variety last year: "It's a love story between two men set in the 30s that has explicit sexual content that or at least it challenges you with the sexual relationship between these two men. One is a Native American character and one is a corrupt cop in LA. It's set in the 30s. They have to flee LA ultimately and go to Mexico. But it's a love story and with a strong sexual component.
"And what was so remarkable is that it all started with Joaquin having some ideas and some thoughts and just questions and images. And he came to me and said, 'Does this connect to you at all?' And I was like, 'Yeah, this is really interesting.'
"And so we would just be on the phone talking and it developed into a script. He had fragments of ideas and then I started to formulate them into an actual narrative.
"And then I brought my wonderful, brilliant friend John Raymond, with whom I collaborated with on 'Mildred Pierce' into the process. Basically it was just this wonderful, organic way to create the script. And Joaquin was pushing it further into more dangerous territory, sexually."