7/29/2019 Fund of Funds Fraud Helmut Kieners K1 Saga Continues With Barclays Lawsuits

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Fund of Funds FraudHelmut Kieners K1 SagaContinues With Barclays Lawsuits

Germanys so-called mini Madoff Helmut Kiener is back in the news. You may remember Mr.Kiener as being the founder of a fund of funds operation called the K1 Group.

The K1 Group was a Ponzi scheme, and Mr. Kiener was convicted and jailed. Specifically, thecourt sentenced Kiener to 10 years in jail based on a conviction of 86 counts of falsification ofdocuments, and 10 counts of fraud and tax evasion.

In addition to being a fraud, this story received a great deal of attention at the time the scamwas revealed. Kieners co-conspirator Dieter Frierchs killed himself when Spanish police tried toextradite him back to Germany. As more people began to investigate Mr. Kiener it was alsorevealed that before founding the K1 Group he had worked as a telephone book salesman andas a psychologist that had studied something he called, statistical chance theory. He claimed

that this theory allowed him to develop a semi-automatical allocation system using statistics tohelp pick hedge-fund investments. A K1 discussed the supposedly sophisticated allocationsystem used applied, stochastic and statistic parameters.

This begs the question if any operational due diligence checks were supposedly being performedor whether then entire hedge fund selection process was supposed to be model driven?Apparently the answer to this question didnt really matter to many people as a number of largebanks including JPMorgan Chase, Barclays and BNP Paribas lost client money of more than 300million euros, or $375 million in the K1 scheme. Investors are now suing these bank to try torecover some of their losses. A recent case which received media attention is the Germanybased class action lawsuit brought by a conglomeration of German law firms called ProtectInvest

Alliance.

According to media reports, a Barclays spokesperson stated, German courts have found in

Barclays favour in all decisions to date and there has been recognition that Barclays is also avictim of the Kiener fraud.

So if Barclays plays the we were all fooled standard defense and German courts agree

(despite having reportedly banned K1 from marketing the funds in Germany) then, as is typicallythe result in these cases, investors are left with no viable options for recourse since Mr. Kieneris broke and in jail.

This is an example of the type of situation where operational due diligence and backgroundinvestigations (regardless of who performed it) could have gone a long way to cutting off moneyflowing into this type of fraud before it went out of control.

Originally posted on the Corgentum Consulting blog atwww.Corgentum.com/blog

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7/29/2019 Fund of Funds Fraud Helmut Kieners K1 Saga Continues With Barclays Lawsuits

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2013 Corgentum Consulting, LLC

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