Nov. 2 (Bloomberg) -- Helmut Kiener, the K1 Group hedge- fund founder under arrest in Germany on suspicion of fraud, is seeking to sell his oceanfront home in Delray Beach, Florida, for $23 million to repay investors, people briefed on the matter said.

Kiener owns the 14,000 square-foot house through Miami- based Consistent Income LLC, whose managing member is Stefan Seuss, the people said, speaking anonymously because the probe isn’t complete. Seuss was arrested in Miami this week in a Federal Bureau of Investigation money-laundering sting and is tied to an international probe of Kiener, people familiar with the matter have said. A Cayman Islands’ liquidator is selling the property, said the people, who declined to provide details about the investors.

“They are not going to get $23 million,” said Sandra Strickland, an independent Realtor in Delray Beach, about 50 miles north of Miami, as she stood outside the house last week. “Right now, we are mostly flooded with $200,000-and-under properties,” said Strickland, who estimated it’s worth about $12 million.

The three-story Georgian-style home, put on sale in May, features several chandeliers, including one above an oval bath tub, a two-story wood-paneled library and “exotic marble and onyx throughout,” according to the home’s listing on the Web site of Premier Estate Properties. The master bedroom occupies a wing of the first of three floors.

‘Eminently Inviting’

The “lavishly scaled yet eminently inviting” estate has a movie theater equipped with two rows of four leather recliners, a wine cellar and a home gym with at least five televisions hung from the ceiling, according to Premier Estate Properties. It includes a security system with multiple cameras and fingerprint access.

An outdoor-entertainment area features a pool, hot tub, summer kitchen and bar, as well as an “outdoor amphitheater” that includes 12 speakers and two 103-inch all-weather flat screen televisions that are stored underground and rise up when needed. The palm-tree dotted property also includes an additional lot that provides deepwater access and “protected yacht dockage.”

Kiener’s German lawyer, Lutz Libbertz, said he didn’t know what properties Kiener owned in the U.S.

K1 Group is at the center of a criminal investigation after saddling banks including JPMorgan Chase & Co. and Societe Generale SA, with about $400 million of losses, people with knowledge of the probe said. European and U.S. authorities are investigating whether K1, which manages funds of hedge funds, deceived the banks while seeking money to ratchet up its investments.

‘Luxury Lifestyle’

Kiener may have duped Barclays Plc out of as much as $220 million and BNP Paribas SA out of $60 million, according to the warrant for his arrest. Funds were diverted through a network of Cayman Island-based companies, the warrant for Kiener’s arrest shows. The money was used to acquire two airplanes and a helicopter, and some money was allegedly also channeled to acquire two properties in Miami, helping Kiener support a “luxury lifestyle,” the warrant said

The Kiener property was purchased by Consistent Income in March 2007 for $19 million in cash, according to Strickland, who cited property records. It had an appraised value of $14.6 million in 2008, according to the records.

Pascal Liguori of Premier Estate Properties said he’s shown the house “a few times.” He said the owner, whom he wouldn’t identify, wants only prospective buyers to tour the house.

Kiener’s house is 20 miles south of Bernard Madoff’s home in Palm Beach. The U.S. Marshals Service is selling Madoff’s home, listed at $8.49 million, to help pay restitution to victims of the largest Ponzi scheme in U.S. history. Madoff, 71, pleaded guilty in March to 11 counts of fraud and money laundering and was sentenced to 150 years in prison.

To contact the reporters on this story: Joshua Fineman in New York at jfineman@bloomberg.net; Jerry Hart in Miami at jhart@bloomberg.netSaijel Kishan in New York at skishan@bloomberg.net

Last Updated: November 1, 2009 18:01 EST