UPDATE 1-UK's SFO charges Weavering fund founder with fraud

Fri Dec 14, 2012 8:26am EST

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By Laurence Fletcher

LONDON Dec 14 (Reuters) - Britain's Serious Fraud Office (SFO) has charged Magnus Peterson, the founder of Weavering Capital, with fraud and forgery, just months after reopening its investigation into the collapsed $600 million hedge fund.

The SFO said on Friday Peterson was charged with six offences, comprising two of false accounting, one of fraudulent trading, one of fraud by abuse of position and two of forgery.

Investors were left with hundreds of millions of dollars of losses when the Weavering Macro fund, run by Swedish national Peterson, 49, collapsed during the credit crisis.

The fund was found to have more than $600 million in interest rate swaps where the counterparty was a firm related to Weavering.

The first hearing in Peterson's case will take place at Westminster Magistrates' Court on Jan. 7.

The charges are the latest step in a long-running saga that has gripped London's hedge fund community.

The SFO made two arrests in May 2009, but then dropped its initial two-and-a-half-year investigation last September, saying there wasn't "a reasonable prospect of conviction".

Some lawyers questioned the timing of that decision which came days after a Cayman Islands court awarded damages of $111 million against two of the fund's directors.

However, in July the SFO performed a U-turn and reopened its probe, just weeks after damages of $450 million were awarded against Peterson and three other directors, including his wife, in a civil case in Britain's High Court.

High Court Judge Sonia Proudman ruled the interest rate swaps on which the case centred were a "sham" used to manipulate net asset value figures to give investors the impression the Macro fund was successful.

The charges come amidst a crackdown by UK authorities on alleged misconduct in the financial industry.

On Thursday the Financial Services Authority said Thomas Ammann, a banker who encouraged two girlfriends to buy shares based on privileged information, had been sentenced to two years and eight months' jail for insider dealing. The FSA has now secured 21 insider dealing convictions since 2009.

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