Barclays Lawsuits Over K1 Fund Ponzi-Scheme Combined in Germany

Lawsuits against Barclays (BARC) Plc over certificates linked to the 345 million-euro ($466 million) Ponzi-scheme fraud by Helmut Kiener’s K1 hedge fund will be combined in Germany.

The Frankfurt Regional Court said cases against the bank will be bundled. The investors argue London-based Barclays failed to properly investigate the X1 Global Index certificates it had issued which were linked to Kiener, according to court documents.

Kiener, the founder of K1 Group, was convicted in 2011 of defrauding investors and sentenced to 10 years and eight months in prison after confessing to using new investors’ money to make up for losses. Barclays and BNP Paribas (BNP) SA lost a combined 223 million euros and private investors suffered about 122 million euros of losses on products linked to the fund, German prosecutors said at the time.

Barclays “indicated that it reviewed the setup, process flow and handling of the certificates and determined them as feasible,” the court wrote. “The terms mirror what diligence the customer can expect from a bank before issuing a certificate.”

The combined case will move to the Frankfurt Higher Regional Court to determine whether the certificate’s terms were incomplete or incorrect. The court will also have to decide whether time limitations bar the claims. About 150 lawsuits over the certificates have been filed in Frankfurt and Munich, a lawyer for the plaintiffs said in January.

Unfounded Allegations

The allegations are unfounded and the plaintiffs are misusing the legal procedure for combining the cases, Barclays had argued, according to the ruling.

Jon Laycock, a spokesman for the bank, declined to immediately comment.

Kiener’s personal assets have been placed in insolvency proceedings in Germany. X1 Fund Allocation GmbH, a Hamburg-based K1 company, was put in administration in 2009. Barclays issued notes in 2005 and 2007 with X1 Fund Allocation as the investment manager.

The case is LG Frankfurt am Main, 2-12 OH 4/13.

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.