Principals indicted in hedge fund KL Group By Jeff Ostrowski
Palm Beach Post Staff Writer
Wednesday, January 10, 2007
WEST PALM BEACH — A hot hedge fund that captured the imagination of wealthy investors in Palm Beach was little more than a scam, federal prosecutors said today.
Three top traders at failed hedge fund KL Group of West Palm Beach are accused of fleecing investors in a 35-count indictment that alleges wire fraud, mail fraud and money laundering.
Named as defendants in what is arguably the biggest financial scam in Palm Beach County history, are: John B. Kim, Won Sok Lee, Yung B. Kim, KL Group LLC, KL Florida LLC, KL Triangulum Management LLC and Shoreland Trading LLC.
From 2000 to 2005, KL raised more than $194 million from 250 investors, the U.S. Attorney's office said.
For a time, KL Group was the hottest hedge fund for Palm Beach's wealthy investors, thanks to its claims of outsized returns of 100 percent a year.
"In truth," federal prosecutors said, "millions of dollars were being lost and millions more were taken by the defendants for personal expenditures without ever having been invested."
John B. Kim, 38, is in Palm Beach County Jail on a civil contempt of court charge.
He defied a federal judge's asset freeze order and was jailed in November in an attempt to force him to turn over $543,000 that disappeared. Kim said he lost the money trading options.
Won Sok Lee and Yung Kim, John Kim's brother, fled to South Korea in 2005, after securities regulators closed the hedge fund.
US Attorney Reports Hedge Fund Advisors Indicted In Alleged $190 Million Scam - Investment & Business US
Posted on Wednesday, January 10, 2007
LAWFUEL - R. Alexander Acosta, United States Attorney for the Southern District of Florida, Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Division, and Don Saxon, Commissioner, State of Florida’s Office of Financial Regulation, announced that Jung Bae Kim, also known as John B. Kim, 38, formerly of Jupiter, Florida, has been charged by a West Palm Beach federal grand jury in Case No. 06-80197-Cr-KLR in a thirty-five count Indictment with conspiracy to commit wire fraud, mail fraud, conspiracy to commit money laundering, and numerous substantive acts of wire fraud, mail fraud, and money laundering.
The Indictment alleges that John Kim and others orchestrated a massive investment fraud in the operation of various hedge funds under the umbrella of the KL Group, LLC, initially based in California and later in Palm Beach County. Also charged were Won Sok Lee and Yung Kim, John Kim’s brother, for participating in the massive scheme, in which nearly $195 million was received from investors between 2000 and 2005. Also indicted were three hedge fund advisor companies that were allegedly owned and controlled by the individual defendants: KL Group, LLC, KL Florida, LLC and KL Triangulum Management, LLC. The corporate defendants were charged only in connection with the investment fraud conspiracy.
According to the charges, the defendants touted to investors through quarterly mailings and website postings that the KL Financial Group was a hugely successful family of hedge funds. In reality, however, the funds lost millions and millions of dollars, and allegedly paid old investors with new investors’ funds. In addition, the Indictment alleges that Kim and other defendants used counterfeit documents falsely reporting investment returns in order to fool lawyers, accountants and ultimately their victims, the investors.
In early 2005, the Securities and Exchange Commission began legal action to shut down KL’s operations. Shortly thereafter, U.S. District Court Judge Kenneth L. Ryskamp appointed a trustee to oversee the assets of KL.
John Kim made his initial appearance in Court in West Palm Beach on January 10, 2007 before U.S. Magistrate Judge James M. Hopkins. Won Sok Lee and Yung Kim are fugitives.
U.S. Attorney Acosta stated, “The United States Attorney’s Office will continue to prosecute investment fraud, especially individuals who misuse technology and the internet to defraud the investing public. Despite its public representations of profitability, KL Financial was nothing more than the proverbial house of cards, which came tumbling down thanks to the superb investigative work of federal and state law enforcement in this case.”
Jonathan Solomon, Special Agent in Charge of the FBI’s Miami Office, added, “Investors must have faith in the securities market for the market to thrive. As demonstrated in this case, part of that faith comes from swift regulatory and law enforcement action against those individuals and companies that swindle investors.”
Commissioner Don Saxon of the State of Florida’s Office of Financial Regulation stated, “This case is an excellent example of the results that can be achieved when federal and state agencies work together. We were happy to provide assistance to the Office of the U.S. Attorney and the FBI during this complex hedge fund investigation. This prosecution serves as a sobering reminder to investors of the need to carefully investigate all investment opportunities before investing.”
Mr. Acosta commended the investigative efforts of the Federal Bureau of Investigation and the State of Florida’s Office of Financial Regulation. The case is being prosecuted by Assistant United States Attorneys Stephen Carlton and Andrew Lourie.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at www.usdoj.gov/usao/fls . Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov/ or on pacer.flsd.uscourts.gov/.
DOJ indicts KL hedge fund principals South Florida Business Journal - 8:26 AM EST Thursdayby Jim Freer Print this Article Email this Article Reprints RSS Feeds Most Viewed Most Emailed The U.S. Department of Justice on has indicted the three principals of failed hedge fund company KL Financial Group on charges of wire fraud, mail fraud, money laundering and conspiracy to commit those crimes.
In its criminal case in U.S. District Court in West Palm Beach, the DOJ filed charges against Jung Bae Kim, also known as John Kim, as well as Won Sok Lee and Yung Kim.
The DOJ listed KL Financial's three hedge fund advisory companies and Shoreland Trading, a broker-dealer that completed trades for KL Financial, as defendants on the mail and wire fraud conspiracy charges.
The Securities and Exchange Commission on March 1, 2005, closed KL Financial, which was based in West Palm Beach. The charges were violating securities laws and defrauding investors.
The DOJ alleges KL Financial and its partners raised almost $195 million from investors, then used almost all of the money for personal expenditures or lost it on investments.
The 35-count indictment includes seven counts of wire fraud and nine counts of mail fraud on which brothers John Kim and Yung Kim, as well as Lee, are defendants.
Each of those 16 counts carries maximum penalties of 20 years in prison and/or a $250,000 fine.
The charges say the defendants used quarterly mailings and Web site postings to tout KL Financial to investors, indicating the company was a hugely successful family of hedge funds. In reality, the DOJ said, the funds lost millions of dollars and allegedly paid old investors with new investors' funds - a classic Ponzi scheme.
The indictment also alleges John Kim and other defendants used counterfeit documents falsely reporting investment returns to fool lawyers, accountants and ultimately investors.
"Virtually all the money was lost, on things that included gambling and trips to Las Vegas," said Guy Lewis, a partner in Miami-based law firm Lewis Tein, the court-appointed receiver for KL Financial.
Lewis Tein has recovered about $5.5 million for investors by getting title to and then selling cars, jewelry and properties KL Financial bought with investors' funds.
Lewis Tein is continuing to seek control of other assets owned by the Kim brothers and Lee.
KL Financial had about 230 clients, all of whom met the high-net-worth qualifications to invest in hedge fund ands and many of whom live in South Florida.
John Kim made his initial court appearance in the case on Wednesday in West Palm Beach, before U.S. Magistrate Judge James M. Hopkins.
Won Sok Lee and Yung Kim are fugitives.
At Wednesday's court session, John Kim was represented by a court-appointed attorney from the federal public defender's office. Efforts to reach that office for comment were not successful.
The case is being prosecuted by assistant U.S. attorneys Stephen Carlton and Andrew Lourie.
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