Many articles have been published on the closure of FBME Bank. Most of these articles are biased and highly influenced by information provided by the staff of the bank. It is understandable but often creates more indistinctness for the banks’ customers. In March 2015 we published on our main website the article ‘the downfall of FBME Bank‘ and received numerous responses from different entities, individuals and stakeholders. That the article got a lot of attention was clear when we spoke with the European Commission on the challenges for FBME Bank and its customers.
It is no wonder that a process that normally takes, based on the European directives on bank failures, a year to finalize took almost two years. Nearly every step taken by the central bank of Cyprus was challenged by FBME, its army of lawyers (paid by the reserves of the bank and therefore indirect by the banks customers) and the media.
More indistinctness was found in the cases between FBME and the central bank of Cyprus at the arbitrage tribunal of the International Chamber of Commerce (ICC) in Paris and US court where FBME tries to refute the allegation from FinCEN. Both cases solely discuss responsibility and therefore liability. The case FBME Bank vs Lew can shed some light on the vision of magistrates towards the scrutiny FinCEN usually does before they publish a Notice of Finding that can apply the fifth special measure.
The absolute low in information provision was the FBME Bank Ltd. White Paper, published on the 10th of March 2016 at the online FBME Ltd platform – a copy of the Whitepaper is available upon request since FBME Ltd. wisely deleted the original content. It as an emotional but unfounded epic tragedy that desribed a case of David against Goliath where the truth was garbled and David was shocked of the vendetta started against him by the evil authorities with their own agenda. Our response that refutes the legal points given by the author of the White Paper is published here. There is no need to go into further detail in this article.
One of the previous administrators found in the customer files of FBME Bank numerous companies and individuals who should not have been allowed to open a bank account at all due to various reasons. At a later stage in the legal procedures the administrators will probably be heard under oath to share these findings, which will make the house of cards collapse even harder.
If all the above is not enough, there are numerous public cases that speak for themselves:
- PEP – Political Exposed Persons:
Police have learnt that a sum of around 10 million Euro was transferred to FBME Bank in Tanzania under suspicious circumstances. Information made available last week from Italy indicates that the treasurer of the Northern League political party (which is allied to former prime minister Silvio Berlusconi), Francesco B., is under investigation for fraud, embezzlement and money laundering.
- FBME Bank vs Lew:
In the case FBME Bank vs Lew, US court concluded that it will not second guess FinCEN on its finding that FBME poses a primary money laundering concern, or its resulting imposition of the fifth special measure. “The Court therefore finds that FBME has not established a likelihood of success on the merits of its claim that FinCEN’s ultimate finding is arbitrary and capricious under the Administrative Procedure Act (APA).” Nevertheless, the Court further concluded that such a finding does not relieve the agency of its obligation to adhere to the APA’s procedural requirements in at least two respects: (1) it did not provide FBME with the notice and thereafter all the public information available to FinCEN; and (2) it did not explain why other less drastic remedies were not chosen. This administrative verdict was moreover explained by FBME Ltd. as a victory, while the original measure was not challenged and the verdict basically strengthens the position of FinCEN and the central bank of Cyprus.
- United States of America vs Scheinberg
In an effort to defraud credit card processors through various deceptive means desgned to trick United States banks and financial institutions into processing gambling transactions on the Poker Companies’ behalf, defendants violated the Unlawful Internet Gambling Enforcement Act (UIGEA) and engaged in bank fraud and money laundering.
The case is a federal criminal case against the founders of the three largest online poker companies, PokerStars, Full Tilt Poker and Cereus (Absolute Poker/Ultimatebet), and a handful of their associates. One of these associates was Triple Seven Inc.
Triple Seven Inc. held account CY1211501001065983USDCACC002 at FBME Bank Cyprus. This account was according to the District Attorney used as poker processor account and therefore involved in illegal activities from at least November 2006 and continuing in or about March 2011.
On December 20, 2011, Absolute Poker co-founder Brent Buckley pleaded guilty to misleading banks. The plea deal calls for him to receive a sentence between a year and a year and a half in prison. Sentencing was set for April 19, 2012. Buckley was sentenced to 14 months.
On January 17, 2012, Ira Rubin entered a plea agreement in a Manhattan federal court in front of U.S. Magistrate Judge Gabriel Gorenstein. Rubin agreed to plead guilty to three of the nine counts of conspiracy to commit bank fraud he faced and is due to be sentenced on May 17, 2012. Rubin is expected to be sentenced to 18–24 months of prison. He received a three-year sentence as Judge Kaplan laid down the hammer, stating, “You are an unreformed con man and fraudster,” and calling his actions a “brazen” defiance of U.S. law. “A significant sentence is necessary to protect the community.”
John Campos pleaded guilty in March 2012 to a single misdemeanor bank gambling charge. He was sentenced in June to three months in prison. During his plea, Campos said his processing of the gambling proceeds for PokerStars and Full Tilt Poker was not in return for a $10 million investment in the bank.
- Claims against Mukhtar Ablyazov
In February 2009, The Republic of Kazakhstan took control of JSC BTA Bank due to significant concerns regarding the banks ability to continue as a going concern. The banks financial statements for the year ending december 31, 2008 recorded a negative equity of approximaltely 6.1 Billion USD. After an investigation JSC BTA Bank brought the bank action in the UK against Mr. Ablayazov, as former chairman of the bank, accusing him of misappropriating over 1 Billion USD from the bank.
An investigation by the US showed a suspicious bank transfer with remitting bank FBME Bank Tanzania Ltd. (remitter: Amber Limited) in the amount of 27.4 Million USD. This transaction was executed on the 9th of June 2011.
In November 2012, a U.K. court ordered Mukhtar Ablyazov to pay £1.02 bln ($1.63 bln) plus interest. The court also ordered “new post-judgment asset-freezing orders be made against Mr. Ablyazov in an unlimited sum and new asset-freezing orders in relation to certain other defendants.”
Why FBME had to close…
These are just a few findings that come from a random Google search. Obviously when we dig deeper, there will be more, especially since FinCEN managed to locate 4.500 of these suspicious transactions. FinCEN and the central banks are never allowed to take the steps they did if they cannot show evidence that support their claims. As it is in most cases, district attorneys and governmental bodies don’t share their findings before their hearing in court. This is similar for the case the lawyers from FBME try to build. They won’t share their pleading notes either.
Maybe the most shocking fact is that now that the Deposit Protection Scheme is activated, many of the profiles of the banks customers are not up to date. Out of a little over 420 customers who filed their claim at the offices of the central bank of Cyprus, more than a handful of customers had to send a copy of their previous passport (that expired between 2009 and 2013, with the most bizar request for a passport that already expired in 2006). To put things into perspective, all European banks block an account if the proper due diligence documents of a customer are not available. It is a mystery why so many accounts at FBME Bank kept active while passports expired and company documents are not available.
FBME Bank closed. It will not re-open its doors anymore. The reason is simple and clear, it is inevitable that a bank run will follow upon the opening and the short term liquidity of the bank is not sufficient enough to grant all transfers and withdraws from accounts.
Step number one is now to file a claim at the deposit protection scheme in Cyprus. Afterwards the liquidation procedure will start and at the end of the legal proceedings, there is space to file a claim for additional compensation.