The Bank of Cyprus and its former CEO Andreas Eliades were found guilty of market manipulation by the Nicosia criminal court on Thursday, in a case related to the Bank`s capital shortfall in 2012.

In the same case the Court found the two defendants not guilty on the rest of the charges. Besides the Bank of Cyprus and Eliades, defendants in the case were also former top executives of the Bank Theodoros Aristodemou, Andreas Artemis, Giannis Kypri and Giannis Pechlivanidis who were found not guilty on all charges.

This is the first court decision in a series of legal cases against the Bank of Cyprus as a legal entity and former bankers, that followed Cyprus’ financial collapse.

The Nicosia criminal court announced on Thursday that the Bank of Cyprus and Andreas Eliades were guilty of market manipulation, which was charge number 4 on the charge sheet, that took place between 19 June 2012 and 26 June 2012 in Nicosia. It said that at the Bank’s Annual General Meeting on 19 June 2012, Eliades, then a member of the Board of Directors and Chief Executive Officer, made misleading statements before the Bank`s shareholders in relation to its capital deficit.

Undoubtedly, the Court said in its decision, Eliades “was fully aware that his statement was unfounded and we have no doubt that knowingly and in full awareness that it was unsupported he referred to a deficit of €200 mn. In this way he misled the Bank’s shareholders and generally everyone who was present at the Bank’s Annual General Meeting (as well as the public opinion), by communicating false data and leading them to erroneous conclusions and to misconceptions about the situation at that time in relation to the Bank`s deficit”.

“It is, we believe, a matter of common sense that if defendant number 4 (A. Eliades) wanted to inform correctly, honestly, sincerely and without misdirecting the Annual General Meeting he could very simply and without much detail explain the real situation, the difficulties that existed and had already been discussed at the Board and present the unpredictable factors …”, the Court said.

“We would say that something similar was done in the next morning by defendant number 4 (A. Eliades) who wrote to the Governor of the Central Bank of Cyprus and one reasonably wonders why he could not have given the same information-estimation to the shareholders-investors. In this way both the shareholders and other stakeholders would have got the picture and after evaluating it they would be free to act as they wished in relation to their shares or their investments,” the Court noted.

“In essence, defendant number 4 spread information that gave misleading indications, which were clearly related to the equity value of defendant number 1 (Bank of Cyprus), and no other explanation was given as to why he did it, except that he did not want at that time to give a true picture or make known the difficulties that existed. On the contrary, he wanted to reassure everyone, and especially the shareholders, to avoid any negative reactions or actions by them in the market,” the criminal court added.

It said that Eliades was one of the Bank’s executives who at the time was “the controlling / directing mind”.

All the defendants were found not guilty in charge number 2, concerning market manipulation between 14 June 2012 and 26 June 2012, and more precisely as regards the fact that the members of the Bank`s Board of Directors failed to take appropriate action to issue a public announcement on a major event related to the significant increase in the Bank’s capital needs from the €200 million it had announced on 10 May 2012.

“Our conclusion is that charges 2, 3, 5 and 6 have not been proved and the defendants are acquitted and discharged and that charge 4 has been proved beyond a reasonable doubt, of which defendants 1 and 4 are found guilty”.

The Court has set a hearing on 20 December for sentence mitigation.