The founder of one of London's oldest hedge funds, whose $600 million Weavering business collapsed in the wake of the financial crisis, goes on trial next Monday accused of 16 criminal counts of fraud, false accounting and forgery.
Magnus Peterson, a Swedish-born financier, faces allegations of fraudulent trading, fraud by misrepresentation, forgery, abuse of position, false representation and one offense of obtaining a money transfer by deception between 2003 and 2009.
Peterson denies the allegations.
The high-profile trial, scheduled to last up to 12 weeks, will shed light on what Britain's Serious Fraud Office (SFO) alleges was a web of deception in the run-up to Weavering's collapse in 2009, six months after the bankruptcy of Wall Street's Lehman Brothers panicked global markets.
But the trial could also raise fresh questions about why Britain's SFO closed its 2-1/2 year investigation in 2011, saying it had no reasonable prospect of conviction, only to re-open it under the new leadership of David Green 10 months later.
The decision marked one of several SFO U-turns after Green became director in 2012 following a period described by British lawmakers as sloppy and with scant regard to procedure or the public purse.
Green has vowed to prosecute more high-level fraud and restore faith in the government agency, which relies on special cash injections from the government called "blockbuster funding" for its biggest cases to bolster a meager annual budget of around 33 million pounds ($53 million).
Weavering Capital acted as an investment adviser to a variety of funds, whose fortunes fluctuated.
But its flagship Weavering Macro Fixed Income fund lies at the center of this story. It was incorporated in the Cayman Islands, Dublin listed and had around $640 million under management in 2008.
When the fund collapsed in March 2009, swamped by a wave of redemption requests in the wake of the fall of Lehman in September 2008, investors were left nursing hundreds of millions of dollars of losses.
The SFO alleges the fund failed because its net asset value had been inflated by interest rate swap deals — often where fixed interest payments are exchanged for floating rates pegged to a benchmark to manage exposure to fluctuating rates — with a related Weavering company in the British Virgin Islands.
Peterson, a charismatic former interest rate and foreign exchange trader, moved from Sweden to London in 1989. He set up Weavering Capital in 1998.
