Phoenix Kapitaldienst employee investigated in EUR 600m fraud case

A local court in Frankfurt has started insolvency proceedings against Frankfurt-based derivatives brokerage Phoenix Kapitaldienst GmbH.


Last week, Germany's financial services regulator BaFin froze Phoenix's business operations after finding the company's accounts "unclear" on the whereabouts of some trust funds.


An employee of Phoenix Kapitaldienst GmbH, which was founded in 1992, is being investigated by German prosecutors for allegedly faking the existence of about EUR 600 million in assets.


BaFin stated: "These irregularities consisted of probably manipulated account statements of Phoenix feigning the existence of assets." The irregularities were uncovered by new management at Phoenix, who told Frankfurt police in a criminal complaint that there is a discrepancy of EUR 600 million in the company's books.


The employee, who has not been identified, is being probed over charges of fraud and breach of trust, according to Thomas Bechtel, a spokesman for prosecutors in Frankfurt.


The allegations relate to an account held at London-based brokerage Man Financial that Phoenix used to make transactions, according to Man Financial. An internal review by Man Financial showed there are no irregularities at the company and none of its money has been lost, according to a spokesman.


``It appears that certain accounts in the books of Phoenix do not exist at any company at the Man Group,'' Man Group Plc said in a statement today on Regulatory News Service. ``The Man Group has incurred no loss, has no financial exposure to Phoenix, and all Man client and proprietary funds are fully accounted for.''


Phoenix has about 30,000 clients in Germany, Austria, Switzerland and Scandinavia who may be able to claim some redress because the fund is part of a compensation system in Germany. Under the terms of the compensation scheme, investors can claim 90 percent of their investments back, up to a maximum of EUR 20,000.

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