Barclays Is Sued in Germany Over Kiener’s K1 Fund Ponzi-Scheme

Barclays Plc was sued in Germany by investors who lost money in the 345-million euro ($460 million) Ponzi-scheme fraud by Helmut Kiener’s K1 hedge fund.

About 150 suits over so-called X1 and K1 certificates were filed at courts in Frankfurt and Munich, Klaus Nieding, a lawyer for the plaintiffs, said in an e-mailed statement today. When issuing certificates on the underlying Kiener indexes, Barclays failed to properly review the K1 products, said Andreas Tilp, another lawyer working on the cases.

K1 Group founder Helmut Kiener 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 in the wake of the financial crisis. Barclays and BNP Paribas SA lost a combined 223 million euros and private investors lost about 122 million euros, German prosecutors said at the time.

“Barclays in a big way distributed so called X1-certificates by Kiener,” Nieding said. “We estimate the total volume of certificates with Kiener products issued by Barclays at 300 to 400 million euros.”

Germany’s Manager Magazin reported the suits earlier today.

Jon Laycock, a spokesman for London-based Barclays said the claims in the lawsuits are “wholly without merit.”

“The German courts have found in Barclays’ favor in all decisions to date with a recognition that Barclays is also a victim of the Kiener fraud,” Laycock said in an e-mailed statement.

K1’s funds are being liquidated in the British Virgin Islands. Kiener’s personal assets were placed in insolvency proceedings in Germany. X1 Fund Allocation GmbH, a Hamburg-based K1 company, was put under administration in 2009. Barclays issued notes in 2005 and 2007 with X1 Fund Allocation as the investment manager.

The Frankfurt court was asked to bundle the suits under a procedure that allows handling them as a single case. An additional 220 claims were started in an out-of-court mediation procedure, said Nieding. Those cases could eventually be added to the pending suits, he said.

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