28 January 2015
13 year jail sentence for Hedge Fund Manager
Former hedge fund manager Ulf Magnus Michael Peterson was sentenced to 13 years imprisonment. Mr Peterson was the founding director of Weavering Capital (UK) Ltd and a former investment manager.
He was found guilty by a jury at Southwark Crown Court of furnishing false information, fraudulent trading, obtaining a money transfer by deception, forgery, fraud by abuse of position and fraud by false representation.
Weavering Capital (UK) Ltd was an English incorporated investment management firm that went into administration on 19 March 2009. Its primary function was to act as investment advisor to a Cayman Islands incorporated hedge fund, Weavering Macro Fixed Income Fund Limited.
The investigation focused on interest rate swap trades between the Weavering Macro Fund and another offshore company, Weavering Capital Fund Ltd, which Mr Peterson also owned and controlled.
The fund operated for a period of 6 years. Mr Peterson used the swap trades to inflate artificially the Macro Fund's investment performance, and thereby mislead investors as to its true value.
Following the financial crisis in 2008, investors asked for their money back, however they were informed that there were no real assets to fund any repayments. The fund ceased trading and liquidators were appointed. Investors lost $536m and Mr Peterson personally made £5.8m from the fund between 2005 and 2009.
This represents a victory for the Serious Fraud Office (SFO) in the first prosecution brought against a hedge fund following the financial crisis. The SFO was assisted in its investigation by the investors, auditors, liquidators, the Irish Stock Exchange, City of London Police and overseas law enforcement authorities including the British Virgin Islands, Cayman Islands, Germany, Luxemburg, Republic of Ireland, South Africa, Sweden, and Switzerland.
Both Mr Peterson and his company, Weavering Capital (UK) Ltd, were based in the UK and as such the SFO had justification to investigate. However this was a highly complex matter crossing multiple jurisdictions, and this case highlights the SFO’s ability to turn to the assistance of overseas law enforcement authorities to gather evidence to support their prosecutions.
The case also demonstrates the SFO’s intention to investigate the financial services sector in context of the financial crisis. The SFO stated that the length of sentence handed down reflects the damaging and extended nature of Mr Peterson's crime. It is yet to be seen if the 13 year sentence will be appealed.
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