Barclays at a loss after K1 hedgie fraud
BARCLAYS may have lost up to $240m (£146m) in a case involving a German hedge fund founder arrested following a corruption probe into a caribbean-registered fund he ran.
The bank is among a number of institutions affected by the case, in which German and US authorities are investigating Helmut Kiener, 50, who founded Germany’s K1 hedge fund group, over allegations of fraud and breach of trust.
Prosecutors say the affair spanned the Atlantic and featured lavish personal spending on aircraft, a helicopter and luxury properties.
The case centres on the K1 Global Sub Trust hedge fund run by Kiener, a psychologist by training who once sold ads for the Yellow Pages in Germany before moving into the financial sector.
Kiener may have channelled almost $220m from Barclays to funds he controlled contrary to investment agreements, while a separate deal with Barclays generated about $20m of management fees for Kiener.
“There is a suspicion that the 50-year-old suspect did not comply with investment guidelines agreed with an English and a French bank among others and has used several millions in funds contrary to agreements,” prosecutors said in a statement.
A Barclays spokesman declined to comment on the specifics of the case.
“We are co-operating fully with the authorities in their investigation and as such it is inappropriate for us to comment,” he said.
Kiener’s lawyers have said they would file an appeal against his arrest and detention in a prison in Wuerzburg, southern Germany.
Regulators are working on stricter supervision of the hedge fund industry following high-profile scandals such as the conviction of Bernard Madoff and the current probe into the Galleon hedge fund case.