The hedge fund manager of collapsed hedge fund Weavering Macro Fixed Income Fund Ltd has been given a 13-year prison sentence at the Southwark Crown for his part in a false accounting $536m (£356m) fraud
Magnus Peterson was found guilty of eight counts of fraud, forgery, false accounting and fraudulent trading following a Serious Fraud Office (SFO) investigation.
The SFO found that over a six-year period investors were misled into putting $780m (£519m) into the Macro Fund, which was marketed as a low risk and liquid fund primarily engaged in exchange trading.
In fact, Peterson was involved in a complex series of financial transactions involving derivative swaps which included creating $600m (£399m) of bogus swap contracts between the Weavering Macro Fixed Income Fund and an associated offshore company Weavering Capital Fund.
When investors began asking for their money back in December 2008 following the worldwide financial crisis, there were no real assets to fund any repayments.
Unable to pay back investors, the Macro Fund ceased trading on the Irish Stock Exchange in March 2009 and liquidators were appointed. The net losses to the investors were approximately $536m (£356m).
The SFO said that throughout the fund's existence Peterson, a Swedish national, rewarded himself handsomely from investors' monies, to the value of £5.8m between 2005 and 2009.
At Peterson’s conviction, following a three-month trial, Mr Justice Smith said: ‘You knew the risks that cheating entailed for investors …It was entirely foreseeable that investors would lose huge amounts.
Sophisticated dishonesty on this scale calls for the maximum sentence possible.’
The SFO said the case was one of the first hedge fund prosecutions of its kind to arise out of the 2008 financial crisis. A decision on director disqualification is to be scheduled for later.
Jane de Lozey, SFO’s joint head of fraud, said: ‘The length of sentence handed down reflects the damaging and extended nature of Mr Peterson’s crime. The loss to investors was vast and was compounded by the defendant’s continued deception as to the true health of their investments. That the SFO pursued this case demonstrates its determination to prosecute the top-most tier of complex economic crime.’
EY Ireland, which had audited the Macro fund, is the subject of an ongoing legal claim being brought on behalf of creditors. A spokesperson for the firm declined to comment.