Bank of Cyprus Pcl announced that it will contest a lawsuit filed by the Trustees of the Aremissoft Corporation Liquidating Trust. The Bank denies the content of the law suit and all demands contained therein.
Bank of Cyprus has instructed its legal advisers to take all necessary steps for disputing and rejecting all claims made by the plaintiffs and has hinted strongly that the case is groundless. The Aremissoft case relates to several securities fraud committed in the US whereby the accounts of Aremissoft were artificially boosted to boost the share price, after which and according to allegations filed in the US, the two former Cypriot owners of the company, Lykourgos and Rois Poyiatzis sold shares and made huge profit at the expense of small shareholders. Poyiatzis has settled with the above Trust returning about USD 200 mln to Liquidating Trust as part of a settlement deal , whilst the Trust is pursuing action against Lykourgos who is alleged to have made in excess of USD 100 mln in profit from the scheme. No further information on the nature and extent (if indeed any) of the claim against BOC have been disclosed.
The lawsuit, filed with a New York district court, seeks damages from the bank of at least USD 200 mln according to unofficial press reports and is supposed to have been made to force BOC to hand over crucial and sensitive information and documentation that will prove that the fraud involved the two accused, using Cyprus accounts.
Kyprianou, who currently lives in Cyprus, was detained by local authorities in October 2002 on suspicion of conspiracy to defraud and exporting currency under false pretences.He was remanded in custody for a week and was released without ever being charged after the prosecution witnesses from Bulgaria mysteriously went missing.
Among other things, AremiSoft is accused of reporting false revenues and announced multi-million dollar acquisitions of software companies with substantial revenues when in reality the companies were insignificant with small revenues.
And AremiSoft had paid only a small fraction of the publicised acquisition price. Now the US-based investors are bringing the heat on the Bank of Cyprus, in which Kyprianou held several deposit accounts.
In addition, the plaintiffs claim, the bank maintained accounts for AremiSoft and certain of its affiliates, as well as for front companies owned or controlled by Kyprianou.
The lawsuit reads:
“In disregard of its duties of diligence and care, as well as its contract obligations to AremiSoft as depositor, Bank of Cyprus allowed Kyprianou to engage in transactions whereby he converted tens of millions of United States dollars from AremiSoft to his own accounts, and thereafter allowed Kyprianou to launder proceeds obtained by him in further breach of his fiduciary duties to AremiSoft.”
According to the plaintiffs, the bank should have ceased all its transactions with Kyprianou as soon as it gained knowledge, or “reasonable suspicion” that these transactions “result from some malfeasance.”
Instead, the financial institution “turned a blind eye”.
In one example, an account was opened with the bank in the name of Southwood, an offshore company incorporated in the British Virgin Islands. The company, say the plaintiffs, was one of many fronts used by Kyprianou to move money around.
“Since at least February 2000, Bank of Cyprus was aware that large US dollar deposits representing proceeds of sale of AremiSoft stock were deposited in Southwood’s account at Bank of Cyprus and from there wired to accounts jointly owned by Kyprianou and his wife at HSBC in London.”
