Hedge fund chief cuts deal with feds in huge fraud investigation
By Alexandra Navarro Clifton
Business writer
Posted March 18 2005
The head of collapsed hedge fund KL Financial made a deal with federal investigators Thursday, agreeing to turn over $1.1 million in personal assets and to cooperate fully with the government.
In return, John B. Kim will get access to $46,000 in a joint checking account, part of which will pay for eye surgery on his 18-month-old daughter, Securities and Exchange Commission attorneys told a federal judge during a hearing in Fort Pierce.
"We were sympathetic to the human factor and his family," said court-appointed receiver Guy Lewis. "Apart from that, I have no sympathy for Mr. Kim."
About a dozen investors in KL Financial were also in U.S. District Judge Kenneth Ryskamp's courtroom, looking for answers to what happened to their money. The SEC believes at least 250 investors were defrauded out of as much as $115 million. After SEC and FBI investigators searched the firm's office last month, Ryskamp appointed Lewis to take over the company on March 2.
The two other principals, Won Sok Lee and Yung Bae Kim, are missing and believed to be in South Korea. Because the case is in civil court, neither can be extradited to face investors. The only way to pursue extradition is if criminal charges are filed. A federal jury is investigating, according to a report filed in court Thursday by the receiver.
Although one attorney for investors questioned giving Kim any money, the agreement gave the SEC access to assets it could not have recovered otherwise, said Mike Tein, Lewis' law partner.
"The bottom line is we now have assets that we didn't have before," said Tein. "We also now have a guide to the company's paperwork who can point to the signposts of the fraud."
The agreement includes a home Kim bought in South Korea that he paid $650,000 for and is estimated to be worth $1 million. Also turned over is $150,000 in cash stored in a safety deposit box and $308,000 in accounts under other Kim-owned companies. The deal does not extend to Kim's Jupiter home, which is worth $1.4 million, according to county records.
According to the receiver's report, Kim and two other company principals diverted more than $20 million of investor money for personal use.
KL Financial used Skyline Futures Trading and Skyline Futures Management to transfer $5 million to a KL investor just two weeks before Ryskamp issued a temporary restraining order.
So far, Lewis and his team of attorneys have recovered $2.3 million.
Tein said he is investigating whether Bank of America and clearinghouse Penson Financial should turn over another $9.5 million in former KL Financial accounts.
"It's a fair agreement," said attorney Adam Rabin, who represents a Palm Beach County investor who lost between $4 million and $8 million. "Getting Kim's cooperation will help streamline things because the critical component to the case is information." |
