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Laiki Bail In losers offset losses by purchasing indebted properties in Cyprus.

Date: 12/05/13

Soon after the proposed resolution of Laiki Bank it became apparent that deposits would be offset against any debt within Laiki, offering a window of opportunity for shrewd minds.

This simple rule of offsetting debt against deposits, combined with the legislation allowing a seller to assign his rights to property, left an interesting loophole to be exploited  by sharp eyed investors.

Here is how it worked:
Party A has lost in the bail-in resolution of Laiki Bank say 500,000 Euro
Party B has a mortgage with Laiki Bank for again 500,000 Euro.
Party A buys through assignment procedure Party B’s property, wiping out the debt with the offset.
Party B loses the debt while party A gets a property.

This potential loophole is now closed due to the Bailout package becoming law. It will be interesting to see how many such sale’s contracts were logged at the Land Registry over the last month or so... 

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