Reuters: Bankruptcy News: UPDATE 1-Hedge fund boss found guilty in $600m fraud

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UPDATE 1-Hedge fund boss found guilty in $600m fraud May 30th 2012, 15:19 Wed May 30, 2012 11:19am EDT * Damages of $450 mln awarded against Peterson * Case centred on $600 mln of interest rate swaps * Peterson had "sense of invincibility", "gambler's mentality"-judge By Tommy Wilkes LONDON, May 30 (Reuters) - Magnus Peterson, the boss of collapsed hedge fund business Weavering, has been found guilty of defrauding investors and ordered to pay hundreds of millions of dollars in damages. Judge Sonia Proudman ruled that Peterson, manager of the W eavering Macro Fixed Income fund, deceived clients and breached his duty of care to investors with a strategy that could not cope with the vagaries of markets at the height of the global credit crisis. Damages of $450 million were awarded against Peterson, who was seated next to one of his fellow defendants when the judgment was handed down at London's High Court on Wednesday, and three other directors including his wife, Amanda. The outcome comes a day after Britain's Financial Services Authority doled out a record fine to Italian academic-turned-fund manager Alberto Micalizzi, in a further sign authorities are clamping down on errant hedge fund bosses. "I do not accept Mr Peterson's assertions that the investors understood his strategy very well. He cannot show any document in which he explained it," Proudman wrote in her judgment. Proudman said that Peterson, who has represented himself throughout the case, may have committed the fraud "out of a sense of invincibility, self-belief, and a gambler's mentality." Three other directors at the fund firm -- Edward Platt, Charanpreet Dabhia and Amanda Peterson -- were also found guilty of negligently permitting fraud to happen. Liquidators of Weavering, which inflicted hundreds of millions of losses on investors, launched a civil case a gainst Peterson and other Weavering staff last year after Britain's Serious Fraud Office dropped its probe into the 2009 collapse. Throughout the case Peterson denied lying to investors. "SHAM" The case centred on more than $600 million of interest rate swap agreements between the Macro fund and a British Virgin Islands company called Weavering Capital Fund (WCF), which was related to Weavering. Robert Anderson QC, representing the liquidators, alleged Peterson misled investors by concealing the fund's investments in the swaps. Proudman said the swaps were never intended to be enforceable instruments but were a "sham" used to manipulate net asset value (NAV) figures to give investors the impression the Macro fund was successful. Jones Day partner Barnaby Stueck, who represented the liquidators, said in a statement after the judgment that Weavering's investors believed Peterson should not be allowed to escape with mere bankruptcy. "They will be asking the Serious Fraud Office to reconsider its decision not to proceed with the criminal investigation given these very clear findings," he said. The SFO dropped its two-and-a-half-year probe last year, saying there was not "a reasonable prospect of conviction". Link this Share this Digg this Email Reprints

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