IMHO the 700k is blocked as the 128k plus-some are the part that won't be touched.
you will not lose all the 700k, "only" couple of percent.
stop cryin, that's just TAX EVASION catching up to you.
Nitpick: tax avoidance, not evasion. Evasion is illegal, avoidance is just (arguably) unethical.
Whilst I don't generally cry a river for people with huge sums of money who end up somehow having slightly less huge sums of money, I do have much sympathy for the OP in this case. That was a business account - a bunch of people putting their time and talent into providing goods and services for a larger bunch of people. Who are now all fucked.
One thing though: how much of that is really 'blocked' blocked? That amount looks like a helluva lot more %-wise than all the newspapers I've been reading suggested. Just read "Cyprus Finance Minister: Uninsured Laiki Depositors Could Face 80% Haircut". Well fuck that!
I was earlier going to express my disappointment with the tastelessness and over-the-top-ness of the OP's avatar. But now I can see where they're coming from, so quite frankly, Merkel can suck it.