THE TRUSTEES of bankrupt Nasdaq-listed AremiSoft Corporation in the United States are suing the Bank of Cyprus for allegedly laundering the ill-gotten gains of a financier under investigation for stock fraud.
The lawsuit, filed with a New York district court, seeks damages from the bank of at least $40 million, money defrauded from AremiSoft investors in the course of a major stock market scam.
The man in the eye of the storm is Lycourgos Kyprianou, former chairman and CEO of AremiSoft. He is alleged to have bribed auditors directly or through associates to conduct false audits relating to company acquisitions.
US authorities have charged Kyprianou, among other things, with securities fraud and money laundering and are treating him as a fugitive after he refused to return and face the charges.
Kyprianou, who currently lives in Cyprus, and joint CEO Roys Poyiadjis are suspected of making well over $300 million in secret sales of Aremis stock while the company was reporting artificially inflated revenues.
Poyadjis has returned $200 million to the Liquidating Trust as part of a settlement deal.
According to the US Securities & Exchange Commission (SEC), which launched an investigation into the company, Kyprianou and other officials “blatantly” misrepresented AremiSoft’s true business and financial condition.
Kyprianou 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.
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.”
Yesterday the Bank of Cyprus released a short statement, in which it rejected “completely the content of the lawsuit and the claims made therein.
“We have already instructed our legal advisors to take all the necessary measures to challenge and reject all the claims made by the plaintiffs.”
