German jailed for €345m Ponzi scheme

K1 GROUP founder Helmut Kiener has been convicted of defrauding investors with a €345 million Ponzi scheme and sentenced to 10 years and eight months in prison.

Kiener, 52, was found guilty of fraud, forgery and tax evasion by a court in Wuerzburg, Germany.

Kiener confessed to using new investors’ money to make up for losses in the wake of the financial crisis and to having manipulated some account statements.

Barclays Plc and BNP Paribas SA lost a combined €223m and private investors lost about €122m, prosecutors said.

Dieter Frerichs, the former managing director of two K1 funds in the British Virgin Islands, killed himself last year to avoid being arrested on the Spanish island of Mallorca.

“Kiener’s system only worked as long as he managed to acquire fresh funds,” the court said in a statement.

“His investors’ chance to earn any return was almost zero. This case is extraordinary because of its size and the number of cheated investors.”

The fund’s accountant, who can only be identified as Claus Z, was convicted of aiding Kiener and was sentenced to three years and nine months in prison.

Achim Groepper, Kiener’s lawyer, said he was satisfied with the sentence because it was less than the 12 years and nine months sought by prosecutors. The verdict won’t be appealed.

Kiener was arrested in 2009 after a German-US probe triggered by JPMorgan Chase & Co’s discovery of suspicious transactions involving K1 when it acquired Bear Stearns Cos, a person familiar with the matter said at the time.

Kiener used funds from BNP to acquire luxury real estate in Florida and his German home town of Aschaffenburg that he planned to use for himself, prosecutors said.

Through a network of companies and people, he also bought Mercedes, Bentley, and Maybach cars, two boats and jet skis with BNP money, while telling the bank the money would be invested in various hedge funds and real estate, according to the prosecutor.

The lender lost about €52m, according to the indictment.

K1 Invest Ltd and K1 Global Ltd were the two main funds he operated and which took the losses that prompted the trial.

Kiener told the court in May that he began forging account statements for K1 Invest immediately after it was set up.

Banks that gave him money had to approve his investment proposals and the funds in which he invested and “could have protested against the investment,” Kiener said in a statement read by his lawyers.