A West Palm Beach, Fla., grand jury has indicted the three men who ran hedge fund KL Group on charges of mail and wire fraud, conspiracy and money laundering. The jury also indicted KL Group and subsidiaries KL Forida and Triangulum Management.

The U.S. Attorney's Office for the Southern District of Florida, in cooperation with the Federal Bureau of Investigation and the Florida Office of Financial Regulation, has sued Won Sok Lee and brothers John Bae Kim and Yung Bae Kim for allegedly defrauding 250 investors of $195 million between 2000 and 2005.

The suit says the defendants used quarterly mailings and website postings to promote KL Group as a hugely successful family of hedge funds that delivered annual returns of 100%. "In reality, the funds lost millions and millions of dollars and paid old investors with new investors' funds," according to the U.S. Attorney. "The defendants used counterfeit documents falsely reporting investment returns to fool lawyers, accountants and the investors."

Authorities said the partners used the money to travel on private jets, go on gambling trips, rent extravagant office space and purchase cars and condominiums.

John Bae Kim appeared in court, but Yung Bae Kim and Lee have been fugitives ever since the Securities and Exchange Commission raided KL Group's office last February. Investigators believe the two are in South Korea and intend to extradite them.

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