Stefan R. Seuss, German financial manager, was arrested in his home in Miami charged of money laundering as part of global criminal investigation into the German hedge fund. The K1 Group, whose business activities became the reason of losses about US$400 million for major banks, is headed by Helmut Kiener who is now in custody after being arrested by German prosecutors in his house 40 km from Frankfurt.
The K1 Group is alleged of organizing “circular transactions” with a network of investment firms and offshore companies in many countries, including BVI, to make an illusion of having enough money for backing up loans from the banks. Among the banks involved in the case there are Barclays, JPMorgan Chase & Co. and BNP Paribas.
Bank’s money were then transferred to offshore companies in the British Virgin islands and other jurisdictions, and from their accounts – to the accounts in foreign banks. Seuss is said to have ties with various Swiss financial institutions.
In the allegations against Mr. Kiener, the relationship with Barclays is described that began in 2005 when he allegedly agreed to set up K1, a fund of hedge fund. Mr Kiener is said to have ignored the rules for investments agreed with Barclays and used other firms to channel about US$114m provided by the bank into two other hedge funds based in the British Virgin Islands and managed by him.
It is remarkable that the German arrest warrant for Mr Kiener, for some unclear reasons, describes Mr Seuss as a witness. The arrest warrant includes information that the Swiss bank lent US$31.7m to a firm connected to Mr Kiener, and some part of this money went into one of his BVI-based hedge funds.
Mr Kiener is represented by the Munich law firm Lutz Libbertz, which said that they were going to appeal against his arrest. The law firm described allegations against Mr Kiener as thin and based on police inquiries rather than real evidence.