Reuters reports that German authorities are investigating Helmut Kiener, the founder of the K1 hedge fund, on concerns that the fund may have engaged in circular transactions that created the illusion that K1 had more collateral for loans than turned out to be the case.

And Bloomberg reports that the hedge fund may have saddled several large banks, including BNP Paribas, Barclays and JPMorgan Chase with loan losses of up to $400m. The news agency also reports that an FBI money-laundering sting targeting two financial professionals in Florida and Nebraska is somehow thought to be tied to the K1 probe.

The New York Post reports that the first UBS client prosecuted by the US government for tax evasion has been sentenced. Steven Rubinstein, 55, got a year of house arrest and 3 years probation. He was also ordered to pay a $40,000 fine. Rubinstein admitted hiding some $6m from the IRS, and is said to have provided 'extensive help' to authorities as they probed the bank's activities.

In the meantime, The Financial Times reports that hedge fund Galleon Group, which is being wound down following the insider information allegations made against founder Raj Rajaratnam, is said to have paid hundreds of millions in fees ($250m last year alone) to Wall Street firms and, in return, 'regularly received market information that would not have been disclosed to most investors'. The newspaper quotes one unnamed executive who dealt with Galleon, who said: 'They wanted anything the public did not have. They got various pieces and put them together, and that was their edge'. The hedge fund is said to have now sold over 90% of its investments.

Finally, Bernie Madoff trustee Irving Picard told reporters Wednesday that the total amount of identifiable losses incurred by Bernie's 'investors' is now $21.2bn - up from the $13bn estimate a year ago. The Wall Street Journal reports that the trustee and The Securities Investor Protection Corp. have now received 15,974 claims, some 11,000 from investors in Madoff feeder funds.

Please use the 'E-Mail' button immediately under the article title to send this item to a friend.

Press here to comment on this story >>

Today in Life: X-Factor Has the X-Factor >>

TODAY

• Bank Tells Staff To Knock Off Early To Make Babies
• 'Do I Seem Like A Guy Who Throws Chairs ?'
• Best Place To Work Update

THIS WEEK

• Best Place To Work 2010 Latest
• Top Firm Told To Give Up Bonuses
• 'Sorry - But Christmas Is Cancelled'