A German hedge fund founder convicted in his home country of running a Ponzi scheme faces U.S. charges along with an accomplice over frauds that cost investors more than $300 million, the U.S. Department of Justice said on Thursday.
K1 Group founder Helmut Kiener, a 53-year-old trained psychologist, was indicted on six counts of wire and bank fraud and three counts of money laundering over alleged schemes to defraud Bear Stearns Cos, Barclays Plc and BNP Paribas SA.
Co-defendant John Tausche, a 61-year-old resident of Blowing Rock, North Carolina, was charged with one count each of bank fraud and money laundering, prosecutors said.
Dubbed a "mini-Madoff" by international press in reference to swindler Bernard Madoff, Kiener was sentenced in July 2011 to 10-2/3 years in prison by a German court after confessing to a fraud that prosecutors said cost investors 345 million euros (US$462 million).
It is unclear whether Kiener has hired a lawyer to defend against the U.S. charges, which were announced by U.S. Attorney Zane Memeger in Philadelphia.
Patty Hartman, a spokeswoman for Memeger, said he plans to seek the extradition of Kiener to face the U.S. charges, but no timetable has been set.
Joseph Grimes, a lawyer for Tausche, said in a telephone interview that his client is "cooperating with authorities in this investigation and trying to do everything to make this right." Court papers for Tausche were not immediately available.
Memeger said that between 2005 and 2008, Bear Stearns lost $82 million as Kiener funneled its money from K1 through Tausche's Oceanus offshore hedge funds and back to K1, creating a false appearance that K1 funds were gaining in value.
Prosecutors also said Kiener from 2007 to 2009 fraudulently induced Bear, Barclays and BNP Paribas to invest more than $100 million in two offshore funds he claimed were legitimate.
Instead, prosecutors said Kiener diverted the money for such things as a $37.1 million Bombardier jet, a $21 million Florida oceanfront property, a helicopter, two boats and luxury cars including a Bentley, a Maybach and a Mercedes.
Tausche was accused of running a scheme involving K1 and Oceanus that cost Barclays $137 million.
Kiener faces up to 200 years in prison and a $7.94 million fine, and Tausche up to 40 years in prison and a $1.97 million find, if convicted on all U.S. charges.
Some investors who lost money with Kiener have in recent months sued Barclays in Europe for about 100 million euros ($134 million) for selling his products to them. Barclays has said the claims have no merit.
Kiener's prison sentence in Germany was based on 10 counts of fraud and tax evasion and 86 counts of falsifying documents.
"I am paying for being able to leave hell and return to purgatory," he said at the time.
JPMorgan Chase & Co bought Bear in 2008.
The Kiener case is U.S. v. Kiener, U.S. District Court, Eastern District of Philadelphia, No. 13-cr-00062.
(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)