KL Financial's John Kim jailed on contempt charge

WEST PALM BEACH — John Kim, one of the principals behind a crooked hedge fund that took some of Palm Beach’s wealthiest residents for as much as $250 million, is behind bars.

Federal Judge Kenneth Ryskamp last week cited Kim for contempt of court for failing to turn over nearly $2 million in assets to KL’s court-appointed receiver and ordered him jailed until he coughs up the money.

“He literally has the keys to his jail cell in his pocket,” said Michael Tein, who is the attorney for KL receiver Guy Lewis. “When he repays the money, he’ll get out.”

Boca Raton attorney Gary Klein represents many of KL's victim. His reaction when he heard the news: "It's about time."

Last March, Kim agreed to settle a law suit the Securities and Exchange Commission brought against him and the other KL principals a year earlier by accepting a court order barring him from violating federal securities law. He also agreed to surrender any assets he had to the receiver in order to compensate KL’s victims.

That included $384,000 from the sale of a vacation home Kim maintained in South Korea, a Porsche 911 worth about $40,000 and about $100,000 worth of jewelry. Instead, Kim used that money, plus about $1.4 million he received from friends and family, to make futures trades “like a gambling addict,” Tein said.

He lost nearly every dime of it.

Ryskamp called it “probably the most flagrant contempt citation I’ve seen.”

How Kim got the cash and how he squandered it, as described in court documents, is one truly twisted tale of lies and some really, really bad trading. He admits to the story, admits that his actions were wrong but now claims poverty as his defense to stay out of jail.

KL Financial principal John Kim is seated second from the right. Next to him are, from the left is Palm Beach trusts lawyer and KL principal Ronald Kochman, KL marketing director George Schneider and Won S. Lee, another KL principal who has fled the country. The two men on either end are not identified.

 

Futures trading is essentially betting on the price of a particular item, oil say, or pork bellies, whether it will rise or fall. It’s an extremely volatile way to invest; fortunes literally can be made one day and lost the next.

Kim particularly liked to make trades on the value of the euro and on securities based on the S&P 500 and Nasdaq 100 stock indexes. Unfortunately, he was either incredibly bad at it or extremely unlucky.

First, he convinced his wife, Nicole Kim, to sell her Mercedes SL, which fetched $70,000.  

He lost every dime making trades, but he just couldn’t admit it to her, so he pawned his Porsche 911 for $40,000 and gave the money to Nicole as trading profits.

That created a problem with the receiver, who now wanted the Porsche. Kim stalled, saying he lost the title. Then he told the receiver that the keys were in an office. Kim changed his story a third time, saying that he had parked the Porsche in a public lot in Irvine, Calif., then he claimed that he couldn’t remember where he parked the car.

Finally Kim admitted that he sold the car months before.

Kim borrowed $100,000 from a friend identified in court documents only as Mr. Q, who also allowed him access to his trading account. Kim blew that money on more bad trades. He went to a West Palm Beach pawn shop, getting $50,000 on jewelry worth more than $100,000. He used a portion to repay Mr. Q and used the rest to make trades, which he lost.

He made $384,658 from the sale of the Korean vacation home; instead of directly transferring the money to the receiver, he had it wired to his wife’s bank account. He lied to his wife, took the money and lost every dime within a month.

Kim formed a Delaware company called JNL Futures. From September 2005 through May 2006, Kim raised about $1.2 million from family and friends, which he transferred into JNL trading accounts. He says he lost most of the money in futures trading.

“I don’t know what this guy was thinking,” Tein said. “I do know he wasn’t thinking about the (KL) investors.”

Kim along with his brother, Yung Kim, and partner Won S. Lee, formerly of Riviera Beach, started KL in the late 1990s, operating out of California. In 2003, the hedge fund moved to North Palm Beach and began attracting some of Palm Beach’s richest residents as clients.

In early 2005, the SEC examined the books of KL’s stock brokerage, Shoreland Trading, and found massive losses that caused the agency to investigate KL itself.

Days later, Yung Kim and Lee fled the country; SEC investigators and the FBI raided KL’s local offices, which had moved to the Esperante building in downtown West Palm Beach, forcing the hedge fund to close.

The U.S. Attorney’s Office is conducting criminal investigation into KL.