Police in the U.S. and Germany have made three arrests in connection with the fraud investigation into German fund of hedge funds K1 Group.

The firm’s founder, Helmut Kiener, was arrested yesterday on suspicion of fraud and breach of trust. A German court today ordered him held in custody.

Meanwhile, U.S. police arrested two suspects in Miami and Nebraska, both reportedly connected to the K1 probe.

Stefan Seuss was arrested at his Florida home yesterday, while Thomas Meyer was arrested in Nebraska. Both face charges of money-laundering in U.S. federal court in Philadelphia, were an indictment against them was unsealed yesterday. Prosecutors would not confirm that the arrests were linked to K1, but the Miami Herald reports that the case against Seuss and Meyer stems from the K1 probe.

U.S. and German authorities have spent most of this year investigating K1, which allegedly misled its banks to win greater leverage for its fund. Those banks may be saddled with about $400 million in losses as a result.

Prosecutors say Seuss and Meyer were caught in a sting operation planned by the Federal Bureau of Investigation and Internal Revenue Service. The two men allegedly offered to move money for a software and CD/DVD pirate who turned out to be an undercover federal agent.

If convicted, each faces up to 20 years in prison.

German prosecutors said they have another suspect in their investigation, although it is unclear whether that unidentified individual has also been arrested. That suspect is a manager at a German K1 company, according to Bloomberg News. Kiener’s arrest came amidst a flurry of activity in Germany as prosecutors from the city of Würburg searched several houses, including Kieners, as well as the Swiss offices of Treukapital Treuhandverwaltung AG, K1’s administrator. Treukapital has not been charged with any wrongdoing.