UPDATE 2-Kuwait financier facing U.S. fraud suit found dead

KUWAIT, July 26 - A brash Kuwaiti financier facing a fraud suit by U.S. authorities was found dead on Sunday in an apparent suicide that sent shockwaves through the Gulf Arab financial sector.

A security source told Reuters that Hazem Al-Braikan appeared to have died from a single gunshot wound to the side of the head, while a policeman standing outside Braikan's house said the well-connected financier, 37, had shot himself.

Braikan was the CEO of Al Raya Investment, which is 10 percent owned by Citigroup Inc, and had been at the centre of a financial scandal that erupted last week.

The U.S. Securities and Exchange Commission filed a lawsuit against him and two other finance firms last week, saying they had improperly earned millions of dollars from trades in two U.S. firms, Harman International Industries Inc and Textron Inc. .

"It's very sad news. This crisis has seen a lot of people in the Gulf and across the world fall from grace, and each person is different in terms of their ability to handle pressure," said Mohammed Yasin, chief executive of Shuaa Securities, in Dubai.

A policeman at Braikan's house in the Kuwait City district of al-Rawda told Reuters that Braikan's brother had called for help.

An employee at Al Raya said Braikan had not come to work on Sunday, the start of the working week in the Gulf region.

"We are shocked. Everybody is shocked," the employee said by telephone. "We called his brother, and he confirmed the news.

"He was here at the office yesterday until 7 or 8 at night. I don't know why he decided to end it."

'IN THE HANDS OF LAWYERS'

Reached by Reuters on July 25, the day before his death, Braikan declined to comment on the case.

"I have nothing to say. It is in the hands of the lawyers now."

Hours later, he issued a statement saying he had named a U.S. attorney to review case and defend him, declaring: "I would like to confirm on the soundness of my legal situation."

In papers filed in Manhattan federal court last week, the SEC said Braikan and entities linked to him earned more than $5 million from well-timed trades in the two U.S. firms.

Other defendants include United Gulf Bank and KIPCO Asset Management Co (KAMCO). Both are part of the Kuwait Projects Co (KIPCO) group.

All the firms have denied the allegations.

KIPCO is affiliated with senior members of Kuwait's ruling al-Sabah family and is the biggest investment firm by assets in Kuwait.

KAMCO and United Gulf Bank said on Friday they made no gain from trading in the shares of Harman and Textron.

Shares in KIPCO slid 3.5 percent on the Kuwaiti bourse on Sunday, on the first trading day after the lawsuit was filed.

The SEC said it obtained an emergency court order freezing the trading profits in U.S. accounts held by Braikan and the other firms.

An SEC official said an investigation began soon after learning about a takeover hoax last Monday, at the same time as the markets and media outlets.

Harman shares briefly soared after several media outlets reported that a private investment firm called Arabian Peninsula Group planned to buy it at almost double its market price.

The incident was similar to a phony offer for Textron in April from a United Arab Emirates-Kuwait consortium.