No Bail For K1’s Kiener

Nov 17 2009 | 3:48am ET

Helmut Kiener, the German fund of hedge funds manager under investigation for fraud, will remain in prison after a court ruled he is a flight risk.

The K1 Group founder may have defrauded his banks and brokers of about US$400 million, according to German prosecutors. Kiener, who was arrested last month on suspicion of fraud and breach of trust, had sought release on €500,000 bail. But the Würzburg Rgional Court ruled that “there isn’t a sufficient basis of trust even with regard to the high sum that was offered,” Helga Müller, a spokesman for the court, told Bloomberg News.

An earlier bid by Kiener for release on diplomatic grounds—he is registered in the Netherlands as an attaché for the west African nation of Guinea-Bissau—was also rejected.

Two alleged Kiener associates have been arrested in the U.S. and charged with offering to launder money for federal agents during a sting operation. One, Thomas Meyer, has pleaded not guilty to money laundering charges, the other, Stefan Seuss, is reportedly cooperating with the investigation.

Müller told Bloomberg that the evidence strongly supports four counts of fraud and breach of trust. Kiener’s lawyer has said the case is based on “unfounded” allegations made by K1’s banks, which he has accused of organizing a “witch hunt.”

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