Just who was tipped off in advance of the great Cypriot bank robbery?

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With the prospects of losing at least 37.5% on deposits over €100,000, one would have been very lucky indeed in keeping money out of the Cypriot banking sector, or by having had the great idea of transferring it to London, Zurich, or probably Valletta just before capital controls were issued! The situation in the country was deteriorating in such a way that many may have smelled trouble months in advance and acted accordingly. Some reports state that since June last year, more than 40% of deposits were withdrawn from Cyprus, a large part of it being over the last month, just prior to the bail-in solution announcement. Even though one’s nose is good at “smelling” problems, we believe, in this case, that “ears” have been working much better!

One company – A. Loutsios & Sons was one of those lucky depositors extracting money out of the Cypriot banking system just days before it became virtually impossible. The company transferred €21 million to a bank account in London. It could have been to fund its business activities but as the company is co-owned by the son-in-law of Nicos Anastasiades, the President of Cyprus, it is an intriguing case…

According to a respected Cypriot newspaper, Filelftheros, the President warned his relatives and close friends about what was going to happen so they could safely move their money abroad. Supposedly the President already knew about the banks closure and thus used the privileged information for his and his family’s benefit. If that’s true, he is luckier than the ex-hedge fund manager Rat Rajaratnam by not living in the United States, otherwise he would likely face jail time and probably have to pay fines that could be triple the loss caused by the leak.

The Italian media went even further by stating that 4.5 billion left the country just one week prior to the bank closure. Just hours before the closure, millions evaporated from banks. That is ‘odd’ to say the least. How well informed some people were it seems..!

Some reports even state that certain people were offered the possibility of moving funds between banks after specific banks were closed. One Russian magnate was said to have been offered to move his cash from Laiki Bank to Hellenic Bank by paying a fee upfront.

It is also said that during the two weeks that the banks were closed, that the Cyprus central bank had to ask the ECB for more funds than the amount that was actually withdrawn from the ATM and so implying that many more funds flew away while the banks were closed. Hmmm…

The Cypriot central bank has been trying to assure people about the safety of keeping their money with banks to simply avoid a disorderly bankruptcy of the sector. The last time the central bank tried to calm down its people was in February and, to us, it is simply not credible that they didn’t know about what was going to happen over the next few weeks. Whether Nicos Anastasiades leaked information or not will most probably remain an unanswered question, but one thing is for sure – information leaked. Some depositors were treated differently, possessing inside information and acting accordingly for their own good while others didn’t have the chance to do the same.

The Cypriot banking system is now for all intents and purposes, a “no go” area and the central bank may face civil and criminal charges, sued by angry depositors who will claim failed supervision and fraudulent acts. Some have even stated that they would file a criminal suit against the central bank if one cent is taken out of their accounts. That’s going to be a tough battle, and one that the reviled troika doesn’t care about as long as the €10 billion bailout funds are safe. But, this will have implications for the rest of Europe. And not good ones that’s for sure.

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