The Crackdown against illegal practices used by some hedge funds resulted in an arrest today. The UK’s Serious Fraud Office (SOF) charged Magnus Peterson, founder of Weavering Capital with six criminal offences. The list of charges against him included two counts of fraudulent accounting, two of forgery, one each for fraudulent trading and abuse of position.
The case against Weavering Capital began in 2009; that year marked the liquidation of the hedge fund when it failed to meet client requests for redemption of capital. In September of last year, The SOF had closed the investigation stating that the it was unlikely to win a conviction with the available evidence. However, the probe was reopened under the administration of David Green, the present director of SFO. During the reign of the ex-director, Richard Alderman, the agency was aiming to win compensation for the investors who lost their money; however, now the SFO is focused on prosecution of alleged crimes.
In a separate court judgement made in May of this year, Justice Sonia Proudman ruled against the defendants that included Magnus Peterson, Amanda Peterson, Chas Dabhia and Edward Platt. The ruling charged the defendants with a fine of $450 million. The charge was that they used false interest rate swaps meant to inflate AUM figures of the hedge fund, and staged a fake display of positive performance. The interest swap agreement was held by a company that is linked to Peterson himself. The swap trades were projected to be worth $637 million.
Following the ruling of Judge Proudman, SFO released a statement that it will reopen investigation into Weavering Capital. The first hearing of SFO’s case is scheduled to be held on January 7th. The Senior Fraud Office has become proactive in its crackdown of white collar crime. The office has made arrests on charges of alleged manipulation of LIBOR rates recently. The new director, David Green, was appointed in April of this year.