K1 fund

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The K1 fund was a

BaFin is suspected by German regulators to be a ponzi scheme.[citation needed
]

History

After Dieter Frerichs relocated back to Germany from Spain in the early 1990s, he contacted his friend, qualified psychologist Helmut Kiener, to establish a financial partnership. Together they persuaded 10,000 small investors and banks to invest in an investment fund, founded in 1996 via the Kiener Company as the K1 fund. As neither Kiener nor Frerichs held suitable licenses to run the fund, they appointed ex-banker Michael Smolek to run the fund under the United Kingdom-registered private limited company Nitro Ltd from London.

The business prospered, and by 1999 Kiener claimed to have made 13 million

shell companies named K1 and K1 Global Investments, based in the British Virgin Islands. However, actual control was via Frerichs office in Mallorca
, Spain, marketed to German customers via a telephone line sited in a friend's flat in Munich.

Although further warnings and prosecutions were issued by BaFin with regards the two K1 funds (K1 Global and K1 Invest, a hedge fund), investigations have shown that since 2006 K1 had subscribed a further 300 million euros of investment from both private German investors, as well as banks including

Hypo Alpe-Adria-Bank International. K1 claimed a return on its investments of 825% from 1996 to 2008.[1]

Collapse and investigation

During the

financial crisis of 2008, the K1 hedge fund collapsed.[1] After their appointment in November 2009, liquidators Grant Thornton found that the two highly leveraged funds had a combined 421 million euros ($529 million) of liabilities,[2] and have projected that prospects for the money are poor.[3] In 2012 aggrieved investors filed suits against Barclays Bank. They accuse Barclays of not having communicated that the K1 funds were ponzi schemes when the funds still were solvent, although the bank knew better.[4]
An investigation was started by German federal authorities and BaFin, with the co-operation of the
FBI, the United Kingdom's Financial Services Authority, and regulatory bodies in the British Virgin Islands, France, Hong Kong, Liechtenstein and Switzerland. Authorities presently suspect that much like the ponzi-schemes run by Bernie Madoff and R. Allen Stanford, that monies were serially transferred between overseas bank accounts to make the whole fund look bigger and more stable than it actually was.[5]

Kiener was subsequently arrested and placed in detention in October 2009,[6] while an Interpol-authorised arrest warrant was issued for Frerichs on February 23, 2010.[citation needed]

Helmut Kiener

Helmut Kiener claims while studying at

Johann Wolfgang Goethe University, his studies included “statistical chance theory,” which led to the K1 funds K1 Asset Allocation Method. Kiener claimed to have developed what K1 later described as a “semi- automatical allocation system” using statistics to help pick hedge-fund investments. He lived near Germany's financial centre, Frankfurt.[5]

Dieter Frerichs

Dieter Frerichs was director for two of the K1 funds controlled by the K1 group founded by Kiener. Following the collapse of K1 and issue of the Interpol arrest warrant, on April 13, 2010, Frerichs was arrested at his home in

Daily Telegraph reported the death as an "apparent suicide" and "suicide" respectively.[3][7][8][9]

References

  1. ^ a b c Ebrahimi, Helia; Quinn, James (2010-10-28). "Barclays among losers amid fraud inquiry at German fund". London: Daily Telegraph. Retrieved 2010-07-07.
  2. ^ David Jolly and Raphael Minder (2010-07-05). "Suspect in Fraud at K1 Group Has Died". New York Times. Retrieved 2010-07-07.
  3. ^ a b Armitstead, Louise (2010-07-06). "Investigation into K1 hedge fund hit by death". London: Daily Telegraph. Retrieved 2010-07-07.
  4. ^ "K1/Kiener Funds: Lawsuit against Barclays Bank". Winheller. Archived from the original on 17 December 2012. Retrieved 6 June 2012.
  5. ^ a b David Scheer, Josh Fineman and Karin Matussek (October 28, 2009). "K1 Hedge Fund Probed as Barclays, JPMorgan Face Loss (Update2)". Bloomberg. Retrieved July 6, 2010.
  6. ^ Ebrahimi, Helia (2009-10-29). "Helmut Kiener of German hedge fund K1 arrested". London: Daily Telegraph. Retrieved 2010-07-07.
  7. ^ Jann Bettinga and Charles Penty (2010-07-06). "K1 Hedge Fund Manager Frerichs Committed Suicide, German Prosecutors Say". Bloomberg. Retrieved 2010-07-07.
  8. ^ Hedgefonds-Geschäftsführer begeht Selbstmord, in: Welt Online vom 5. Juli 2010
  9. ^ Mutmaßlicher Deutscher Millionen-Betrüger erschießt sich auf Mallorca, in: Berlin Kurier - News Online vom 5. Juli 2010
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