We are proud to have turned our clients' trouble into a great litigation success against criminal money launderers and to a substantial one-of-a-kind compensation of over €38 million.
Our clients, Mayzus Financial Services Ltd (a UK payment institution, trading as 'MoneyPolo'), OKPAY CY Ltd (a Cyprus electronic money institution), OKPAY Inc (a BVI introducing broker) and Mr Sergey Mayzus, business man and major investor and shareholder to MoneyPolo and OKPAY CY, have been victims of the BTC-E scandal and of a conspiracy well-orchestrated against them by a number of criminal money launderers which resulted to fatal reputational damage and substantial losses to our clients. Following legal action filed before the District Court of Limassol (Cyprus) our clients have successfully proved their case and been awarded compensations of just over €38 million.
Summary of the facts
The Defendants have been the owners and/or operators of the digital platform known as BTC-e. During the years between 2015 and 2017, the BTC-e platform served the world's largest volume of bitcoin exchange transactions, and in June-July 2017 recorded more than US$66m transactions per day (as per Coinmarketcap statistics (www.coinmarketcap.com).
The platform operated normally until 25.7.17, namely until the enforcement of a judgment issued by the Court of California, USA, ordering to track down and arrest Mr Alexander Vinnik (Defendant 1 to the action), being the creator of the BTC-e platform and the proprietor of the entity Canton Business Corporation – Defendant 2 – owner of the BTC-e platform, as well as the closure of the BTC-e and the capture of the www.btc-e.com website, on the basis of 21 categories for, amongst others, conspiracy to commit money laundering, money laundering, participation in illegal currency transactions, and others. With the platform's shutdown, it is estimated that a number of people worldwide lost between US$200-400m.
The US Judgment against BTC-e
Briefly with reference to the judgment of the US Court of Justice of California dated 17/1/2017:
- From 2011 until the day of the decision, the BTC-e platform, also known as CANTON BUSINESS CORPORATION, (Defendant 2 in our clients' case) was one of the largest online digital exchange platforms, which until recently provided services to at least 700,000 users all over the world,
- BTC-e platform was dealing with exchanges of billions of American dollars with cryptocurrencies worldwide among criminals who exchanged their cryptocurrencies from unlawful actions with conventional money (dollars, euros, rubles etc. known as FIAT MONEY)
- This platform, according to the US indictment, was also used by cybercriminals, corrupt politicians and public figures, personal hackers, and drug dealers, with the main goal of "laundering" their illegal proceeds, while reference is still made for the online platform's involvement in one of the largest scams of digital files (Ransomware) with the CryptoWall and CryptoLocker malware,
- according to the US indictment, BTC-e was, in essence, a "black money laundering" and did not have "essential anti-money laundering functions and is therefore a pole of attraction for criminal activities".
Mayzus Financial Services Ltd (MFS UK) has been a licensed Payment Institution in the UK with its headquarters in London, regulated by the Financial Conduct Authority (FCA) of the UK since 2009, with worldwide operations under the name of MAYZUS FS or MFS, owner of the trademarks known as MAYZUS and MONEYPOLO. Mr Sergey Mayzus is a well-known business man mainly in the financial and investment sector, owner of a large number of businesses in Cyprus, Czech Republic, England and Russia, sole owner of MFS UK, and major shareholder in OKPAY CY Ltd (Cyprus), licensed since 2015 by the Central Bank of Cyprus as Electronic Money Institution.
Our Clients & BTC-e
During late 2013, Defendants 2, 3 and 4 (Canton Business Corporation, Always Efficient LLP, Eurostyle Advisor Ltd) approached MFS UK for opening payment accounts with the later. Following representations given by the Defendants, Canton Business Corporation (Defendant 2) was the owner of the BTC-e digital platform and Defendants 3 and 4 were the platform operators. The public could open an account on the BTC-e platform from where they would carry out transactions (purchasing and selling) of fiat currencies with bitcoin; the Defendants would be receiving commissions out of the transactions.
MFS UK agreed to the aforesaid cooperation as these activities were legitimate and did not require any regulatory authorization.
Following the US judgment, as appeared to be: "BTC-e was an international money-laundering scheme that, by virtue of its business model, catered into criminals and to cybercriminals in particular".
It has been our clients' position that the defendants, independently and collectively, each on its own role, conspired against our clients (MFS UK) and having acted fraudulently and with false representations towards our clients' officers, have received banking services for the opening and operation of payment accounts with MFS UK for the purpose of implementing their illegal plans and activities.
The BTC-e effect to our Clients
The US judgment took immediate international dimensions, particularly within the financial sector, which resulted to the capture of the BTC-e website and the arrest of Alexander Vinnik (who "together with individuals known and unknown, directed and supervised BTC-e's operations and finances", as per the US judgment), and thus large number of people worldwide have lost their money. Following the aforesaid incidents, multiple articles were published and public forums were created all over the internet with Mr Sergey Mayzus and the rest of our clients being in the spotlight and wrongly and/or willfully – by unknown hidden persons – were linked to the BTC-e platform as allegedly being partners to the BTC-e, due to the accounts that the BTC-e / the Defendants had with MFS UK. Articles included photographs of Mr Sergey Mayzus, as well as personal and family details of the later, including his place of residence, and some even invited the public to take aggressive actions.
Despite our clients' attempts to prevent what was about to happen (through public announcements and letters sent to forums and publishing websites) in an attempt to notify the public that they were not in any way related to the BTC-e business nor to its' owners and operators, the BTC-e fraud already took enormous global publicity. The BTC-e had immediate, direct and serious negative consequences to our clients through countless online forums with thousands members – victims of the BTC-e – with our clients' names being first topic, with photos of Mr Sergey Mayzus and his family – followed by threats – with details of his assets, including his home and places of residence – where he and his family could be found – , with most conversations accusing him for allegedly being the man behind BTC-e.
Following BTC-e scandal our Clients' business and normal way of life changed significantly causing irreparable damage to their reputation and to their businesses. Banks and financial institutions all over the world, due to the false information produced with respect to our clients following BTC-e scandal, terminated cooperation with them with series of domino effects for our clients, regulators initiated endless investigations over Mr Mayzus and his businesses, our clients' risk level has been increased by all financial institutions, private assets belonging to Mr Mayzus were maliciously damaged, including arson (maliciously setting fire) in a castle in Horní Marsov, Czech Republic, built in 1792 belonging to Mr Mayzus, declared cultural monument in 1964.
Mayzus Vs BTC-e
In an effort to prove their innocence our clients engaged our law firm, A.G.Paphitis & Co LLC (AGP & CO) in Cyprus with instructions to examine the entire BTC-e operations, including the way they acted and the way they managed to mislead and cheat MFS UK in an attempt to implement their criminal plans. What appeared to be was that BTC-e consisted of a large number of persons and entities who, having altogether acted on a conspiracy basis, fraudulently and with intentional misrepresentation against our clients as to their operations and business model, orchestrated a well-planned strategy of money laundering, on the one hand, and a conspiracy plan in misleading MFS UK in implementing their criminal activities, on the other hand.
A legal action for damages was filed in December 2017 against 17 Defendants, some of them relating to the BTC-e operations and some to the conspiracy committed against MFS UK in an attempt to implement BTC-e's plans.
In the overall, the Defendants to the action filed have fraudulently and misleadingly presented to our client MFS UK, a fake and fraudulent model of operations, as a result of which the latter agreed and continued to offer their banking services with the impression that the Defendants' business was in line and in compliance with the relevant legislation with respect money laundering. This way the Defendants established a mechanism of laundering illegal money through the BTC-e platform, while using the services of MFS UK whom they misled as of the type of their operations, ignoring the damage they were going to cause or potentially cause to our clients who as a result have unfairly been damaged, wrongly and mistakenly were connected and defamed as potential partners and co-operators of the BTC-e scandal resulting in serious damage to our clients' interests, their businesses, their good name, the commercial value and their reputation globally, as well as to the peaceful life and family joy of Mr Sergey Mayzus personally.
Judgment in favor of Mayzus & Compensation
In an attempt to compensate our clients for the losses they have suffered the court was referred to and applied Cypriot and UK precedents and case law with respect to fraud and conspiracy (Tsiartas v. Alocay Holdings Ltd (2010) 1(C) Judgment of the Supreme Court 1523, and Kuwait Oil Tanker Company SAK and another v. Al Bader and others (2000) AII ER (D) 692) as well as to text books such as McGregor on Damages and Clerk & Lindsell on Torts.
In accepting that the losses suffered by our clients, including loss of future profits, is the result of fraud committed by the Defendants and that they are entitled to an award of damages for any consequential loss caused due to the Defendants' fraudulent conduct, as well as for aggravated punitive damages, the court applied case law such as Heracleous v. Pitrou (1994) 1 Judgment of the Supreme Court 239 and Aristodemou v. Petrou (1995) 1 Judgment of the Supreme Court 98, Papakokkinou ν. Kanther (1982) 1 C.L.R 65, Andrian Holdings Ltd v. The Republic (1998) 1 Judgment of the Supreme Court 1836, Papachrysostomou v. Costas Gregoriades & Associates, Civil Appeal 118/10, Noble Resources SA v. Gross (2009) EWHC 1435 (Comm), and Midland Tool Ltd. v. Midland International Tooling Ltd (2003) EWHC 466 (Ch).
As the court concluded:
The nature of the Defendants' conduct, as described within the judgment, was such that it showed complete indifference to the rights of others, namely of the Claimants, taking advantage of their services in order to achieve their own unlawful purpose [...].
Based on the analysis made by the court, judgment has been given in favour of our clients and against the Defendants, for different amounts altogether summing up to €37,500,000 as compensations, plus interest and costs.
As one can imagine this judgment apart from being a compensation for our clients' losses and damages, the importance of the judgment goes beyond compensation. Our clients name has 'at last' been proven clean and unrelated to the BTC-e scandal giving the ability to Mr Mayzus and his companies to continue operating and doing business freely without the BTC-e being an obstacle anymore. Although not being a landmark case as such – as per definition of landmark cases which require Supreme Court's establishment of a precedent – this is a case that the court went beyond standard and common calculation of losses but additionally evaluated our clients' rights and liberties that have been harmed, aiming at compensating them as innocent victims of an international scandal, of third parties' unlawful actions who showed indifference to the rights of others.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.