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Former Weavering boss gets 13 years jail time

| 29/01/2015 | 0 Comments
Cayman News Service

Magnus Peterson

(CNS Business): The founder of Cayman Islands-based Weavering Macro Fund, the collapse of which cost investors $536 million, has been jailed for 13 years, one of the longest sentences for fraud ever handed down in the UK.  Magnus Peterson, 51, was found guilty on eight counts of fraud, forgery, false accounting and fraudulent trading after a 12-week trial that delved into the complex world of hedge fund investing. Peterson was sentenced by Justice Smith, who said that “sophisticated dishonesty on this scale” called for the maximum possible sentence.

Swedish-born Peterson had pitched his flagship fund to institutions and wealthy individuals as a low-risk investment offering stable returns.

However, he was found guilty of covering up rising trading losses by weaving a web of deception that unravelled in March 2009, six months after the bankruptcy of Wall Street’s Lehman Brothers induced market panic that prompted investors to clamour for redemptions that Weavering could not meet.

Despite the eventual conviction and now lengthy sentence, in 2011 the UK’s Serious Fraud Office decided to drop the case just days after a judge in the Cayman Islands Grand Court had ordered two Weavering directors to pay $111m in damages. The SFO only reopened the case after pressure from investors following their successful litigation against Peterson and others in London’s High Court.

After the Weavering fund collapsed in 2009, it emerged that its entire investment portfolio was a $637m set of interest rate swap trades with another firm controlled by Peterson. The fund started losing money soon after it was formed in 2003 and the two firms secretly started to make trades with each other without telling investors, “robbing Peter to pay Paul”, the SFO’s lawyers claimed.

The SFO said investors had been misled to put $780m into the Weavering Macro Fund. When they started asking for their money back during the financial crisis in 2008, there were no assets for payments.

During the fund’s existence, Peterson paid himself “handsomely”, the SFO said, taking out £5.8m for himself between 2005 and 2009.

Tags:

Category: Finance, Financial Crime

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