By Christopher Faille, Senior Financial Correspondent
Monday, July 21, 2008

WEST PALM BEACH, Fla. (HedgeWorld.com)-Jung Bae Kim, one of the three principals in a massive investment fraud involving the defunct KL Group LLC hedge funds, has received a prison sentence of 18 years and four months, to be followed by three years of supervised release.

The judge, Kenneth Ryskamp, also recommended to the Bureau of Prisons that Mr. Kim participate in a 500-hour drug program.

Mr. Kim and his brother, Yung Bae Kim, who has been sentenced to six years and three months in jail, both pleaded guilty in a criminal case that arose out of the counterfeit account statements and other deceits employed to bilk investors out of $194 million between 2000 and 2005.

The deceits included the claim, in February 2005, that the KL Group hedge funds had made a one-day profit of $22 million on an investment in Research in Motion Ltd., of Waterloo, Ontario (NYSE: RIMM), the company that manufactures the ubiquitous BlackBerry. There had been no such trade.

All three principals were indicted in January 2007. Yung Bae Kim pleaded guilty in July 2007. His lawyer, Michael J. Malloy of Media, Pa., said in an interview Monday [July 21] that Mr. Malloy’s client “is more than happy that it is finally over” and that the judge in giving Yung Bae a relatively lenient sentence “took into consideration his minor role.”

Jung Bae Kim pleaded guilty this April to just one count of the 35 in the indictment-the one involving that fictitious RIMM profit. His lawyer, Michael Gary Smith, of Fort Lauderdale, Fla., couldn’t be reached for comment.

Messrs. Kim jointly have been ordered to pay restitution of more than $78.5 million through the court-appointed receiver.

According to a statement from the U.S. Attorney’s office, the receiver has thus far recovered $6.5 million with which to provide restitution to the victims.

A third principal of the KL Group, Won Sok Lee, remains at large Previous HedgeWorld Story.

U.S. Attorney R. Alexander Acosta commended the work of the Miami Division of the Federal Bureau of Investigation, and of Florida’s office of financial regulation.

CFaille@HedgeWorld.com

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