Cases & Deals

Weavering Capital secures $450 million judgment in largest hedge fund fraud in British history

Client(s) Clark, Paul and Bouchier, Geoff

In May 2012, the English High Court handed down a $450 million judgment against Magnus Peterson and three other directors and senior employees of Weavering Capital (UK) Limited, the London based manager of the Weavering Macro Fixed Income Fund Limited (the "Macro Fund"), a Cayman Islands hedge fund that collapsed in March 2009, in an action where Jones Day acted for Duff & Phelps, the liquidators of Weavering Capital (UK) Limited.

In early 2009, the Macro Fund was unable to meet redemption requests and it became apparent that its primary "assets" were a series of interest rate swaps with an impecunious BVI company majority owned and entirely controlled by Mr. Peterson. The interest rate swaps had been valued at over $630 million but, in light of the counterparty's net asset position, their true value was negligible. The claims of fraud, breach of duty and negligence focused on the fraudulent use of interest rate swaps to manipulate the net-asset value of the fund and on misrepresentations made to investors who were led to believe that the fund invested primarily in exchange-traded futures and options and held no OTC positions.

Weavering's collapse and related litigation (in both the Cayman Islands and England) has attracted significant interest in the hedge fund industry and press. The English decision has been reported widely in both international and trade press.

Mrs. Justice Proudman's judgment dated May 30, 2012 comes after hard fought proceedings over a period of three years that culminated in a seven week trial in late 2011.

Weavering Capital (UK) Limited & another v Ulf Magnus Michael Peterson & others (High Court, Chancery Division. Claim No. HC09C01915)