arrested the founder of German investment firm K1 Group, Helmut Kiener

Police arrested the founder of German investment firm K1 Group, Helmut Kiener, in connection with a fraud investigation at the firm, a local prosecutor said Thursday.
European and U.S. authorities are investigating whether K1 embezzled millions of dollars from several global banks, including J.P. Morgan Chase & Co., Barclays PLC, BNP Paribas SA and Société Générale SA, the prosecutor said.arrested Helmut Kiener, the founder of the K1 hedge fund, which is suspected of bilking numerous banks, including Barclays Capital, JPMorgan Chase, BNP Paribas and Société Générale, out of about $400 million.That came after prosecutors and police raided Mr. Kiener’s office and home Wednesday in the course of an investigation into suspected fraud and breach of trust at K1 Global, a fund registered in the British Virgin Islands.The state prosecutor, Dietrich Geuder, based in the Bavarian town of Würzburg, said that Mr. Kiener was awaiting a hearing Thursday and that another unidentified suspect was being investigated.BNP, the largest French bank, would only say that ‘‘at the request of the authorities, we are cooperating with them.’’ JPMorgan Chase and Barclays declined to comment, given that the investigation is ongoing. Société Générale said its exposure was ‘‘negligible.’’All four banks’ losses were accounted for on their balance sheets already, indicating that the investigation has been under way for some time.
Mr. Kiener, a psychologist who founded the K1 fund of funds after starting out in marketing in the late 1980s, claimed on his Web site a growth rate of more than 844 percent since 1996, the year he began. While some of the money he solicited may have been put to good use, generating legitimate returns over the period, prosecutors believe that at least a part were used in unauthorized ways.Handelsblatt, the German newspaper, said Mr. Kiener may have used the money to swell the apparent size of the fund, a tactic closer to that of Bernard L. Madoff than Raj Rajaratnam. Calls to Mr. Kiener’s home in Aschaffenburg, near Frankfurt, went unanswered.This is not the first time Mr. Kiener has attracted the notice of German authorities. BaFin, the country’s financial regulator, has tried several times since 2001 to block his funds from doing business with German investors.