Barclays facing £130m losses

Rhian Nicholson
30.10.09 09:51

Banking giant Barclays (BARC) is facing a potential loss of as much as Ł130 million following an alleged fraud at German fund of hedge funds K1 Group.

Founder Helmut Kiener is under investigation from the European authorities and the FBI amid claims of a multi-million pound fraud and breach of trust at his Caribbean registered fund.

Money from Barclays Capital was fed into the K1 Global Sub Trust hedge fund between 2006 and 2009.

"If Barclays had known of the suspect's plans, it would not have provided the K1 Global Sub Trust any funds for investment between 2006 and 2009," the arrest warrant says. It says the funds "are mostly lost as far as we now know".

A spokesman for the German prosecutor said Kiener was under suspicion of providing falsified information to the banks, and embezzling the funds he received.

Banks including Barclays, US bank JPMorgan Chase and French giants BNP Paribas and Societe Generale could have lost substantial sums in recent years.

"There is a suspicion that the 50-year-old suspect did not comply with investment guidelines agreed with an English and a French bank among others and has used several millions in funds contrary to agreements," the warrant says.

Kiener allegedly spent millions of pounds on luxury items including lavish homes and planes after boasting of investment returns of 825% between 1996 and June of this year.

Germany's financial oversight agency warned the financial community about Kiener in 2001, when it prohibited him from administering investments in financial instruments related to his K1 fund, German oversight agency Bafin says.

European and American regulators are working to tighten the screws on the hedge fund industry following the headline-grabbing multi-billion dollar frauds of Bernard Madoff and the current probe into Rajakumara Rajaratnam, the billionaire founder of the Galleon hedge fund who has been charged in a wide-ranging insider trading case.

Barclays says it is co-operating with the investigation.

Barclays facing £130m losses

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