A case of fraud of millions of euros in Cyprus

Russian businessmen used Cypriot companies to get millions from investors 

A case of fraud of an amount above 2,5 million euros is in Cyprus courts focused on a Canadian investor and two Russian businessmen that have secured a large amount of money as an investment in a company based in Cyprus and since then they appear to have defrauded the Canadian, who is asking to liquidate the Cyprus company in order to note the exact amount of the fraud.

The case that took place in a labyrinthine complex of companies and funds from Lichtenstein that ends up in the Cyprus company Posparon Investments Limited, for which the liquidation application has been made in court and in which the directors are the two Russians Olga Katoraychik and Ilia Sokolov.

Russia-Cyprus-Lichtenstein triangle

The two managers convinced the Canadian through a fund that was registered in Lichtenstein to invest 2,5 m. dollars in the Russian company “Kompressor Komplex” which was initially oriented to production of centrifugal compressor machines, reducers and spare parts, to be used in gas, oil, chemical, metallurgical and other branches of heavy industries. In addition, in the agreement that was signed, Posparon Ltd appeared to possess 80% of “Kompressor Komplex”, but according to the liquidation application, Posparon only has 100% of the Cyprus company Wellinom Holdings Ltd, which has the same directors as Posparon, ms. Olga Katoraychik and Mr. Ilia Sokolov.

The two directors, according to the case that is in front of the Cyprus justice system, showed the investor that there was an adjustment of the reasonable value of the investment by 8 m. dollars, without having shown the financial statements of the subsidiaries of Posparon Ltd, which had an objective value and operations. Also, according to the Cyprus audit firm, whose name is at the disposal of 24h.com.cy, the adjustment of the investment was reasonable, as the net value of the assets of the subsidiary company of Posparon Ltd increased.

In 2014, Ilia Sokolov finally sent the financial statements to the Canadian investor and his lawyers, but the explanations provided to increase the value of the subsidiary of Posparon Ltd didn’t satisfy the investor, as it wasn’t clear how the increase of the value of the investment in Wellimom or the subsidiary Agro or the Russian company Kompressor Komplex.

The explanations provided via e-mail the Russian managers of the companies made things even more complicated, as the Russian company, the subsidiary of the Cyprus, had taken a long-term loan of 35 m. dollars approximately from a Russian bank and this loan was the reason the value of the mother company increased in the end.

Konstantin Sokolov behind Kompressor Komplex

After all that, the Canadian that was reasonably shaken asked for a meeting with the Russian directors Ilya Sokolov and Olga Katoraychik but also the final beneficiary, Konstantin Sokolov, to ask for explanations for the suspicions of fraud he had as well as the forgery that took place with the financial statements.

Konstantin Sokolov ensured the investor that from now on he would get up-to-date information personally from Mr. Konstantin Sokolov regarding the course of his investment.

They tried to cover up the forgery

Finally, until 2017, the investor did not receive any substantial information and in spite of the constant attempts of his lawyers to find out the truth, the Board of Directors of the Cyprus company Posparon Ltd, meaning the two Russian directors not only did not investigate the matter, but they also moved forward to convene a general assembly with a subject to reapprove the audited financial statements of the Cyprus company without giving any other explanation on why the reapproval of the financial statements was necessary for Posparon Ltd for the years 2013 and 2014.

In the application for the liquidation of the company, it is mentioned that the Canadian investor considers that there are serious indications of mismanagement and possible inappropriate diligent administration on behalf of the Board of Directors and that the operations of the company were done with deception, with the “help” of the Cyprus audit firm that was used by the Russian directors.

24h.com.cy will continue its investigation on the involvement of Cyprus audit firms and/or legal offices in this case that has larger implications.