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K1 Hedge Fund Said to Be Linked to FBI Money-Laundering Sting

Date: Thursday, October 29, 2009
Author: David Scheer, Sophia Pearson and Susannah Nesmith, Bloomberg.com

A Federal Bureau of Investigation money-laundering sting targeting two financial professionals in Florida and Nebraska is tied to an international probe of German hedge-fund firm K1 Group, people familiar with the matter said.

U.S. prosecutors in Philadelphia unsealed indictments yesterday against Stefan Seuss and Thomas Meyer, saying the pair agreed in 2007 to help an undercover agent move about $500,000 offshore. Before his arrest on that matter yesterday, Seuss was helping authorities unravel K1 Group’s international money transfers, of which he had knowledge, a person familiar with the case said, declining to be identified because that part of the inquiry isn’t public.

K1 Group, a firm that invests in other hedge funds, is embroiled in an international inquiry after saddling lenders including Barclays Plc, JPMorgan Chase & Co., BNP Paribas SA and Societe Generale SA with about $400 million in losses, people familiar with the matter said before Seuss’s case became public. Prosecutors in Wuerzburg, Germany, said they are investigating K1’s founder, Helmut Kiener, for fraud and breach of trust. Police yesterday raided his home near Frankfurt.

Patricia Hartman, a spokeswoman for the U.S. Attorney’s Office in Philadelphia, declined to comment on whether Seuss’s case is linked to K1 Group.

Seuss’s lawyer, David Raben, said his client is disappointed that prosecutors brought criminal charges.

“This investigation has been ongoing and he has offered his full cooperation,” he said. “We look forward to the truth coming out.”

Attorneys for Meyer, a resident of Omaha, Nebraska, with U.S. and German citizenship, and for Kiener couldn’t immediately be located. A woman who answered the intercom outside Kiener’s home identified herself as Mrs. Kiener and declined to comment.

Seuss, also a German citizen, ran a Miami consultancy called Seuss & Partners, helping clients set up offshore companies and foreign bank accounts to shield investments, federal prosecutors said in a statement yesterday. After his arrest, he appeared at federal court in Miami wearing a grey New York Yankees T-shirt and blue jeans. He said he wouldn’t fight extradition to Philadelphia.

To contact the reporter on this story: David Scheer in New York at dscheer@bloomberg.net; Sophia Pearson in Wilmington at spearson3@bloomberg.net; Susannah Nesmith in Miami at susannahnesmith@yahoo.com.