K1 Invest Ltd hedge fund to enter liquidation

FRANKFURT, Nov 10 (Reuters) - A Caribbean-based fund operated by Germany's K1 hedge fund group will go into liquidation after its assets were frozen, the fund's director said in a letter to distributors.

K1 Invest Ltd. a fund based in the British Virgin Islands -- which regulator BaFin tried to ban from doing business in Germany in 2004 -- has hired accountancy firm Grant Thornton to liquidate it, according to a letter obtained by Reuters.

Prosecutors say K1 Invest is managed by Helmut Kiener, K1 Group's jailed founder, whom they suspect of committing fraud and breach of trust. He denies the charges.

Barclays (BARC.L) and BNP Paribas (BNPP.PA) may have lost millions of dollars in the case, which prosecutors in Wuerzburg, Germany say spanned the Atlantic and featured lavish personal spending on planes, a helicopter and luxury properties. [ID:nLT702092]

The allegations and arrest of Kiener "are of grave concern," the letter, dated Nov. 10 said.

The freezing of assets on its bank account and the resulting inability to pay its obligations have led K1 Invest to determine that "voluntary liquidation is in the best interest of the company and the investors," the letter said.

Kiener remained behind bars after his lawyers failed to convince a judge he was the victim of a witch hunt and had immunity as diplomat for an African country. [ID:nL9493033]

In 2004, German regulators tried to prevent K1 Invest Ltd from operating in Germany. K1 Global Ltd successfully appealed the decision, according to the Bafin's website.

(Reporting by Edward Taylor; Editing by David Cowell)