Orlen Loses $230 Million in Tether Payment for Venezuelan Oil

TLDR

• Polish state energy firm Orlen lost up to $424 million after a $230 million USDT payment for Venezuelan crude disappeared.
• The deal began in late 2023 when Orlen Trading Switzerland tried to buy discounted Merey 16 crude using tether.
• Funds were converted into crypto through Dubai intermediaries, then handed off on USB drives in Caracas hotel rooms.
• Contact with Venezuelan brokers was lost after the handoffs, and PDVSA could not deliver the promised oil cargoes.
• Three former Orlen executives now face criminal charges and up to 25 years in prison.

Poland’s state-controlled energy company Orlen has lost hundreds of millions of dollars in a failed cryptocurrency deal for Venezuelan crude oil.

The loss stems from a covert 2023 plan to buy oil using tether, a dollar-pegged stablecoin known as USDT.

According to a report from the Financial Times, the scheme began in Abu Dhabi in November 2023. Samer Awad, then head of Orlen Trading Switzerland, met with Kam Ho “Alex” Tse, founder of Dubai-based trading firm Hannon International.

At the time, the United States had temporarily eased sanctions on Venezuela’s energy sector. This created a short window for buyers to purchase heavy Merey 16 crude at a discount.

Why Crypto Was Used for the Deal

Venezuela’s state oil company PDVSA was largely cut off from Western banks. This meant buyers needed to make partial prepayments using USDT instead of standard wire transfers.

Within days of signing a contract for 6 million barrels of crude, Orlen Trading Switzerland sent an uncollateralized $230 million advance to Hannon International.

The written contract did not mention cryptocurrency directly. Still, Hannon was expected to convert the cash into USDT to help secure oil cargo allocations from PDVSA.

Hannon then worked with several Dubai intermediaries and Venezuelan brokers to turn the dollars into digital tokens.

Court records and blockchain data cited by the Financial Times show the conversion process was costly. One transaction alone cost $400,000 in fees to obtain 80 million USDT.

Another transfer of $135 million produced just 85 million USDT, leaving a shortfall of roughly $50 million before the deal even reached Venezuela.

USB Drives and a Broken Deal

Hannon representatives then traveled to Caracas to meet local brokers connected to PDVSA.

Over several weeks in early 2024, private keys controlling tens of millions of dollars in USDT were physically handed over on USB flash drives.

These handoffs reportedly took place in restaurants and hotel rooms. The first drive, holding 60 million USDT, was delivered on January 5, 2024.

A second drive with 50 million USDT followed on January 28. More drives containing 22 million USDT were passed along between February and March.

After the transfers, communication with the Venezuelan brokers stopped. PDVSA was unable to release most of the promised oil.

Only one ship was loaded, carrying about 500,000 barrels of fuel oil worth $28.8 million. Orlen canceled the contract in March 2024.

When accounting for lost payments, shipping costs and legal fees, Polish authorities estimate Orlen’s total losses at between $378 million and $424 million.

Polish Prime Minister Donald Tusk called the deal a “disgrace in front of the entire world.”

Polish prosecutors have charged three former Orlen Trading Switzerland executives, who face up to 25 years in prison.

Orlen’s current management has since launched international arbitration in Dubai to try to recover the $230 million advance. Hannon International says it acted on Orlen’s instructions and denies responsibility for the missing funds.

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