In 1936, Ioannis Metaxas was appointed Prime minister of Greece by King George II. On 4 August 1936, with the support of King George II, Metaxas initiated a self-coup and established an authoritarian, nationalist and anti-communist regime, specifically outlawing the Communist Party of Greece (KKE). As such, Lioudaki's sister's fiancé Napoleon Soukatzidis was imprisoned for being a communist in April 1937. While in prison, Lioudaki wrote Soukatzidis letters, which were intercepted by the Metaxas regime. These letters were used as evidence against her and described as an offense "concerning the security of the social status." The Ministry of Education asked Lioudaki to sign a statement denouncing communism and dissolving her sister's engagement, but Lioudaki refused.
