Nicosia criminal court on Thursday acquitted most of the defendants in a case relating to the now-defunct citizenship-via-investment scheme, finding that the charges of conspiracy to defraud the state were not substantiated beyond a reasonable doubt.

The case concerned the naturalisation of a foreign national by the name of Mohamed Salem, as well as two relatives of his – Bahaa Salem and Esraa Salem. Salem had invested in Cyprus in order to obtain the Cypriot passport.

Salem himself was not a defendant in the trial. The defendants were real estate developers, businesspeople and attorneys who had facilitated the citizenship application. The criterion for obtaining citizenship at the time was a €2 million investment in real estate.

According to the prosecutors, the defendants had conspired with one another to defraud the state, for example by submitting forged documents falsely showing that the €2 million investment criterion was met. The alleged offences in question had taken place at different dates between 2017 and 2019.

Information relating to the case derived from the public inquiry into the citizenship-via-investment scheme.

But in its ruling the court found no intent to defraud the Republic. Instead, it found irregularities and errors in the paperwork filed.

As such, the court acquitted the following defendants of the charge of conspiracy to defraud: lawyers Fotos Tsangarides and Elli Michaelidou, the director of the Zavos Group Michalis Michael, and the companies PHC Tsangarides LLC and Fullserve Secretarial Ltd.

However, the court did find two of the defendants guilty on the charge of fraudulent avoidance of VAT. They are Michalis Zavos, CEO of Larina Estates Ltd, and the company Larina Estates itself.

The court said these two defendants had knowingly concealed invoices relating to the sale of apartments – apartments which as it turned out were not used as permanent residences by the foreign investor.

Under the applicable law, where real estate was used as a permanent residence for the purposes of the naturalisation programme, such sales were subject to lower VAT.

The public inquiry into the citizenship-via-investment programme – colloquially known as the ‘golden passports’ affair – concluded in June 2021.

The inquiry followed the airing of a documentary by the Al Jazeera network, which led to the axing of the naturalisation programme. The panel found the government broke the law countless times to grant citizenship to over 6,700 people from 2007 to 2020.

It said that 53 per cent of the 6,779 passports granted were done so illegally, encouraged by a due diligence vacuum or insufficient background checks.