John C. Tausche, Hedge Fund Fraud, Pennsylvania 2012

A Philadelphia federal court has sentenced John C. Tausche, 62, of Blowing Rock, NC, to 54 months in prison for his role in a multi-million dollar investment fraud scheme.

Tausche, a hedge fund business manager, was an associate of Helmut Kiener, 53, of Aschaffenburg, Germany, who was charged separately.

The charges alleged that the two engaged in a scheme to defraud institutional investors and caused collective losses of more than $311 million.

Tausche pleaded guilty November 6, 2012, to one count of bank fraud and one count of money laundering.

Kiener controlled several hedge funds, including K1 Global Limited and K1 Invest, which he marketed to international investors. Tausche controlled several offshore hedge funds collectively called the Oceanus Funds.

According to the charges, between March 2005 and December 2008, Kiener allegedly devised a scheme to defraud Bear Stearns entities by representing that, under Kiener’s management, Bear Stearns investment funds would be diversified and independently managed.

Tausche also pleaded guilty to a similar scheme involving Barclays Bank, the K1 Funds and the Oceanus Funds, which caused losses to Barclays Bank totaling approximately $137 million.

The case was investigated by the Foreign Corruption Investigation Group, Homeland Security Investigations – Miami Field Office, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigations, and the German police force Kriminalpolizeiinspektion Unterfranken, with assistance from Barclays Bank, BNP Paribas, and Bear Stearns/J.P. Morgan Chase Bank.

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