Poland's Orlen Trading faces a $230 million loss after a failed oil deal with Venezuela, involving complex transactions and legal disputes.
Poland's state-owned Orlen Trading Switzerland (OTS) is facing a staggering loss of at least $230 million after an unfulfilled oil deal with Venezuela. In December 2023, OTS transferred this sum as an advance payment for Venezuelan crude to a Dubai intermediary, which ultimately failed to deliver the oil. The Financial Times revealed that part of the funds were converted into USDT and shared with partners in Caracas via USB drives containing private keys.
Background of the Deal
The deal originated from a meeting in Abu Dhabi involving Samer Awad, head of OTS, and Kam Ho "Alex" Tse, founder of Hannon International, a Dubai-based firm. On November 29, 2023, OTS signed a contract with Hannon for the supply of approximately 6 million barrels of Venezuelan Merey 16 oil, valued at around $345 million. The agreement required an advance payment of two-thirds of the total value, which OTS provided without the usual collateral or bank guarantees.
This transaction came shortly after the Biden administration temporarily eased sanctions on Venezuela's oil sector, allowing traders to purchase crude at lower prices.
USDT's Involvement
As Venezuela's state oil company, PdVSA, began accepting prepayments in USDT due to restrictions on dollar transactions, the contract with OTS did not mention the use of digital assets. However, Tse converted the received funds into USDT independently, involving other Dubai firms in the process. Discrepancies arose when one intermediary received $135 million but only transferred $85 million in USDT, leading to a legal dispute over the missing $50 million.
Furthermore, an additional $30 million was sent to Horizon Global, another Dubai intermediary, which also failed to deliver the funds to PdVSA. Reports indicate that OTS's total payments for Venezuelan oil reached approximately $330 million, but PdVSA received none of this amount.
Attempts to Secure Delivery
In January 2024, representatives from Hannon traveled to Caracas to facilitate access to PdVSA shipments, using USB drives to transport private keys for the USDT funds. Despite attempts to negotiate new deals, Orlen's vessels remained unloaded, and the contract's delivery deadline passed without fulfillment.
By March 2024, OTS officially terminated the original contract, having incurred shipping costs of $72 million, with little hope of recovering the lost funds. The ongoing arbitration with Hannon is complicated by differing interpretations of the intermediary's responsibilities.
Legal and Financial Repercussions
The Polish government estimates total losses from this affair at around 1.6 billion zlotys (approximately $400 million), which includes shipping and legal expenses. Investigations are underway concerning the actions of former Orlen executives, with charges filed against Awad and others for inadequate oversight. Awad was detained in the UAE but was later released after Poland's extradition request was denied.
The scandal has significant political implications, as it unfolded under the previous management of Orlen, led by Daniel Obajtek, who is now a Member of the European Parliament. The current leadership, under Ireneusz Fonfara, has since canceled the controversial contract.
Ongoing Investigations
The situation raises questions about the legitimacy of the deal, with investigations revealing a complex web of intermediaries and currency conversions. OTS claims Hannon failed to deliver the oil, while Hannon argues it was misled and that funds were lost due to theft or mismanagement by other parties. Prosecutors maintain that the case primarily concerns corporate governance failures rather than outright fraud.
As USDT continues to be the main payment method for sanctioned Venezuelan oil, analysts predict that a significant portion of Venezuela's export revenue will rely on stablecoins in the coming years.
