Canadian citizen Michael Kapoustin, whose name has become synonymous with fraud and embezzlement, was released from a Bulgarian prison at the beginning of July 2008 five years before the end of his 17-year sentence. He was released early for good behavior.

He is barred from leaving Bulgaria because he still owes money to certain people whom the court found to be victims of Kapoustin's business activities in the 1990s.

Kapoustin was sentenced in 2003, although he had been under arrest since 1996. In 2001,  Sofia City Court sentenced Kapoustin to 23 years, but his sentence was later reduced to 17 years by the Court of Appeals.

He has served his time in a low-security prison as confirmed by several TV interviews with him through the years.

Although he never admitted his crimes, Kapoustin was found guilty of setting up a business entity that Bulgarian media subsequently dubbed a “financial pyramid” because of the way it operated. Hence Kapоustin was also nicknamed as a “faraon”. This type of “pyramid” exploited the naivety and irrational expectations for quick profits of thousands of Bulgarians just five years after the fall of communism. His trial was widely covered by Bulgarian-media, particularly by Sega in a series of articles.

Born in Yugoslavia but raised in Canada, Kapoustin registered the company LifeChoice International (LCI) in 1993 in Bulgaria.

LCI’s principal business was the development of new pharmaceutical products, primarily in the area of biological “immuno-stimulators.” To supplement the heavy costs of researching and developing of pharmaceuticals, LifeChoice also engaged in other business activities, including acting as agents and distributors in Bulgaria and countries of the former Soviet Union for manufacturers in Canada and the United States.

Its business involved production and trading as well as acting as an agent and intermediary and engaging in other activities allowed by Bulgaria's legislation. The company later advertised itself as investing in the pharmaceutical sector and oil business besides its primary activities.

Kapoustin owned 75 per cent in LCI with the rest owned by Bulgarian Milka Bogdanova. Kapoustin was the only person responsible for the company's financial transactions and, therefore, the only legal representative of LifeChoice, the court established.

As was subsequently revealed, Kapoustin was mainly offering people investments in unsponsored depository receipts (UDR) and American depositary receipt (ADR) with LifeChoice acting as the non-banking depositary for UDR.

The ADRs were presented as guaranteed by US Federal Depositary Insurance Corporation. The court concluded that the USFDIC had no relation to LCI activity as it served as guarantee only to legal entities based in the US.

According to Sega, LCI offered people an eight per cent monthly dividend on their UDRs in leva and a 151 per cent annual dividend.

UDRs in foreign currency had a monthly dividend of 3.5 per cent and an annual dividend of 51 per cent.

The ADRs had an annual dividend of 217 per cent, Sega said.

The first clients of LCI received the quick dividend they sought. The news about the quick profit spread quickly back to them and resulted in an avalanche of clients wanting to invest in LCI.
During the whole process Kapoustin was the only person responsible for the LCI's investments.

It all looked good until one day in 1996 Kapoustin simply left Bulgaria and all payments stopped. He was later extradited from Germany at the request of Bulgarian authorities.

The court found him guilty of embezzling about 259 963 817 non re-denominated leva which at the time (1994/95) was the equivalent of  $4 242 405. Bulgaria re-denominated its currency in 1999, slashing three zeroes off its bills.

A total of 2821 people have been declared victims of Kapoustin's actions.

His trial was one of the longest in Bulgaria's recent court history. Kapoustin exploited every legal opportunity he could to postpone hearings. He also changed lawyers four times. Later, he asked for a Canadian lawyer to join his defence, which also added to the trial’s time-frame.
He declared a number of hunger strikes and threatened to take his case to the European Court of Human Rights in Strasbourg, claiming that he was being tortured in prison. At one point a claim was filed against the Bulgarian criminal justice system (including the judge and the prosecution) before the Supreme Court of British Columbia in Canada and before a court in Indiana, USA by a group of LCI's investors who claimed that they had forfeited financial opportunities.

A website under Kapoustin's name was launched in his defence. His family, currently in Canada, pleaded his innocence. According to reports in Canadian media, the Canadian government asked Bulgarian authorities for updates on the case on several occasions.
 
Following the news of Kapoustin's release, CBCNews.ca published an interview with his Toronto-based lawyer, Dean Peroff.

Petroff said that the Bulgarian government won't let Kapoustin leave the country until he pays what was described as a “civil debt” of between $17 000 and $30 000.

“We are in negotiations for his ultimate freedom," Peroff told CBCNews.ca. “He has to pay what he calls a 'bogus payment.' We fear for his freedom and his life, just as we did in the past. He feels completely under duress, because he can't get home to his family unless he negotiates this ransom money," Peroff said.
“This is a totally illogical and irrational government [Bulgarian] that we're dealing with,” he said. “This is an arbitrary country [Bulgaria] that has no rule of law and you are always subject to the whims of the authorities.”