Securities and Exchange Commission v. Roys Poyiadjis, Lycourgos Kyprianou and AremisSoft Corp., et al., Civil Action No. 01-CV-8903 (CSH) (S.D.N.Y.)
On November 22, 2002, an Isle of Man appellate tribunal entered a judgment holding that the Commission is entitled to participate directly in proceedings commenced by the Isle of Man Attorney General in October 2001 at the request of the Attorney General of the United States. In those proceedings, the High Court of the Isle of Man has issued restraint orders freezing approximately $175 million deposited in two Isle of Man banks. These funds are alleged to constitute proceeds of fraudulent insider trading in the stock of AremisSoft Corporation. The Commission, the United States Attorney for the Southern District of New York and the Attorney General for the Isle of Man are pursuing the repatriation of the frozen funds to the United States to be used to compensate defrauded AremisSoft investors.
The Commission also has obtained a U.S. asset freeze in a preliminary injunction entered on October 19, 2001 by the U.S. District Court for the Southern District of New York. In its complaint in the U.S. enforcement action, the Commission alleged, among other things, that AremisSoft and two of its former officers, Roys Poyiadjis and Lycourgos Kyprianou, overstated the Company's revenues in its annual report for 2000 and inflated the value of acquisitions made in 1999 and 2000 and that the two former officers engaged in massive insider trading during the period of the reporting fraud. The SEC's civil enforcement action remains pending against Poyiadjis, Kyprianou and two relief defendants that nominally hold the funds in the Isle of Man bank accounts, Olympus Capital Investment, Inc. ("Olympus") and Oracle Capital, Inc. ("Oracle"). Poyiadjis, Kyprianou and the relief defendants have not answered the Commission's complaint.
The U.S. Attorney for the Southern District of New York obtained an indictment of Poyiadjis on December 19, 2001. Poyiadjis has fled to the Republic of Cyprus where he remains to date. On March 22, 2002, the U.S. Attorney's Office filed a civil complaint in rem in the U.S. District Court for the Southern District of New York seeking civil forfeiture of the funds in the Isle of Man banks, and on June 3, 2002 the court entered a default judgment ordering forfeiture of the funds to the United States. On June 24, 2002 a superseding indictment was returned against Poyiadjis, Kyprianou (who resides in Cyprus) and another AremisSoft officer, M.C. Mathews (who resides in India) on counts of conspiracy to commit securities fraud, mail fraud, and wire fraud, substantive counts of securities fraud (both on the market and insider trading), conspiracy to commit money laundering, and substantive counts of money laundering. On July 16, 2002, the Isle of Man Attorney General filed a petition in the High Court seeking to register the civil in rem forfeiture judgment as an external confiscation order under the applicable Isle of Man statute. The Commission has supported and assisted the U.S. Attorney's Office and the Isle of Man Attorney General in the pending Isle of Man restraint order litigation, but it was not previously able to participate directly in those proceedings.
On June 4, 2002, the Commission filed a petition seeking an order of the Isle of Man High Court permitting the Commission to participate directly in the restraint order proceedings. In particular, the Commission argued that under the applicable Isle of Man law, it was a "person affected" by the proceedings and as such it should be made a noticed party. Although the petition initially was denied in a judgment dated July 16, 2002, the Commission successfully appealed that ruling. The appellate judgment found "that the SEC is a person affected by the restraint order" and concluded that "the overall circumstances in this case justify our exercising discretion in favour of the SEC becoming a Noticed Party." The Commission would like to acknowledge the U.S. Attorney for the Southern District of New York, the Federal Bureau of Investigation, the Office of the Attorney General for the Isle of Man, and the Isle of Man Constabulary Financial Crime Unit for the assistance they have provided in this matter.
See also Litigation Release Nos. 17172 (October 4, 2001) and 17641 (July 31, 2002) and Exchange Act Release No. 34-46285 (July 31, 2002).