90 Million Euro Fraud: The K-1 Fund of Hedge Fund Probe Digs Deeper
As a follow up to my previous post surrounding the German fund of hedge funds K1 Group, more news has come to light that the German authorities have made a new series of arrests.
To refresh memories, initial arrests were made last year in regards to an on-going fraud investigation into the K-1. Most notably the firms founder (and former telephone book salesman), Helmut Kiener, was arrested. He still remains behind bars. Perhaps Helmut is lucky, at least he is safe in prison from disgruntled German investors.
K1 Group is at the center of an international criminal probe after saddling banks including Barclays Plc, JPMorgan Chase & Co. and BNP Paribas SA with losses. European and U.S. authorities are examining whether Kiener deceived the banks when he borrowed money.
Now there have been two new arrests. Dieter Frerichs, the managing director of K1′s two British Virgin Island-based funds, and David Zuendorf, who worked with the funds’ administrator Treukapital Treuhandverwaltung AG, were arrested on April 13.
Prosecutors in the southern German city of Wuerzburg said in a statement that these arrests were reportedly the result of renewed searches of foreign premises linked to the original K1 fraud investigation.
“There is a suspicion that investors may have been hit by around 90 million euros in fraud damages,” the statement said, adding that the investigation indicated the investment companies were a “snowball system with no objective of earning a profit”.
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