K1 founder charged with fraud for Ponzi scheme

HELMUT Kiener, founder of German hedge fund group K1, is being charged with fraud, forgery of documents and tax evasion more than a year after he was arrested in a multi-million-dollar investigation.

He is accused of having swindled investors out of about 345 million euros with an elaborate Ponzi scheme, the public prosecutors’ office in Wuerzburg, Germany, said in a statement this week.

Kiener was arrested in October 2009 as authorities said Barclays and BNP Paribas may have lost millions of dollars in the case, which prosecutors said spanned the Atlantic and featured lavish personal spending on planes, a helicopter and luxury properties.

Investors were duped into investing in funds K1 Global Ltd and K1 Invest Ltd by pretending the funds were posting significant profits and would continue to do so, even though both of them had suffered “massive losses”, the prosecutors’ office said.

“Alleged profits could only be paid out via new investments,” it said.

Barclays and BNP Paribas entrusted him with 223 million euros, the prosecutors’ office said. The remaining amount was given to him by almost 5,000 investors.

Lawyers for Kiener have denied he committed fraud and had sought his release on bail, arguing he was a diplomat for the West African nation of Guinea-Bissau, documents appealing against his arrest showed.

“Mr. Kiener will make a statement during trial,” said a spokeswoman for law firm Lutz Libbertz, which represents Kiener, on Tuesday, while declining to comment further.

Alongside Kiener, another man identified by prosecutors only as Claus Z. is being charged with abetment of fraud that caused additional damages of just over 150 million euros.

The prosecutors’ office also said it arrested three further suspects following fresh searches last week.

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