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Boss of collapsed UK hedge fund Weavering jailed for 13 years

Boss of collapsed UK hedge fund Weavering jailed for 13 years

By Nishant Kumar and Carolyn Cohn

The former boss of failed hedge fund Weavering, the collapse of which cost investors $536 million, was sent to jail for 13 years on Friday, one of the longest for fraud in Britain.

Magnus Peterson, 51, was found guilty by a London court this week on eight counts of fraud, forgery, false accounting and fraudulent trading but was acquitted on seven other charges after a 12-week trial that delved into the complex world of hedge fund investing.
Peterson was sentenced by Mr Justice Smith, who said that “sophisticated dishonesty on this scale” called for the maximum possible sentence, a statement from Britain’s Serious Fraud Office (SFO) said.
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.
“The length of sentence handed down reflects the damaging and extended nature of Mr Peterson’s crime,” Jane de Lozey, the SFO’s joint head of fraud, said in the statement.
“That the SFO pursued this case demonstrates its determination to prosecute the top-most tier of complex economic crime.”
Peterson’s conviction is a welcome victory for the SFO, which was lambasted for dropping its investigation in 2011, citing no reasonable prospect of conviction. The case was re-opened after liquidators won a civil suit against Peterson.
His conviction and 13-year jail sentence represents one of the SFO’s biggest wins against a hedge fund manager.
In 2012 former stockbroker Nicholas Levene was sentenced to 13 years in jail for defrauding investors and Kevin Foster was jailed for 10 years in 2010 for running an unauthorised investment business.
Tom Epps, a partner at law firm Brown Rudnick, said the case against Peterson can be seen as part of a series of SFO investigations focusing on the conduct of the financial services sector around the time of the financial crisis.
“We expect that area to remain one of the SFO’s priorities through 2015,” Epps added.