By Debbie Cai

Two hedge fund managers were indicted for alleging defrauding institutional investors and causing total losses of more than $311 million, the U.S. Department of Justice said.

German national Helmut Kiener was indicted in the Eastern District of Pennsylvania with wire fraud, bank fraud and money laundering, based on allegations he devised and directed various investment fraud schemes together with partner John C. Tausche. Tausche, from North Carolina, was charged with bank fraud and money laundering.

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

The charges state between March 2005 and December 2008, Kiener led Bear Stearns entities to believe, under his management, Bear Stearns investment funds would be diversified and independently managed. However, Kiener allegedly funneled Bear Stearns money from K1 through the Oceanus Funds and back to K1, giving the false impression the funds were growing in size and were viable investments.