A hedge fund manager who participated in a scheme to defraud investors of more than $300 million was sentenced today to 4 ½ years in federal prison, federal authorities said.

John C. Tausche, 62, ran the Bahamas-incorporated Oceanus Funds from his offices in Wichita, Kansas. Working with hedge fund manager Helmut Kiener, a German national, Tausche helped create the impression that Kiener's K1 funds were much more profitable than they actually were. Kiener funneled millions from K1 into Oceanus which then returned the money to K1 giving the illusion that K1 was growing in size and a viable investment. The scheme convinced Barclays Bank and Bear Stearns, to which Tausche had supplied false financial data. Barclays plowed $82 million into K1, Bear Stearns handed over $137 million. The banks lost it all.

Prosecutors said Tausche's take was about $114 million but did not say how he'd spent the money.

Kiener, a former psychologist, took his own share and went on a spending spree. According to prosecutors, Kiener bought a $21 million oceanfront estate in Delray Beach; a private executive jet; a Bell helicopter, several cars including a Bentley, a Mercedes and a Maybach; two luxury watercraft; and over $8 million in improvements to his other properties.

Tausche, who has been living in Blowing Rock, NC, with his brother, pleaded guilty Nov. 6 to one count of bank fraud and another count of money laundering in connection with the Bear Stearns fraud. He pleaded guilty to another set of charges in connection with the Barclays scheme. In addition to his prison time, Tausche was ordered to pay $115 million in restitution to Barclays.

Kiener, who was tried, convicted and jailed in Germany as a result of the scam, remains charged in the U.S. with multiple counts of wire fraud, bank fraud and money laundering.

The case was prosecuted in Philadelphia because of its link to another investigation.

Contact Sam Wood at 215-854-2796 or samwood@phillynews.com. Follow @samwoodiii on Twitter.
Contact the Breaking News Desk at 215-854-2443; BreakingNewsDesk@philly.com. Follow @phillynews on Twitter.