Weavering hedge fund boss Magnus Peterson sentenced to 13 years in prison for a $537m fraud

The 51-year-old will have to serve at least half of his sentence in jail

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A judge today handed down one of the toughest sentences of recent times for a white collar crime, giving the boss of a collapsed hedge fund 13 years in prison for a $537m fraud.

Magnus Peterson, 51, will have to serve at least half of his sentence in jail, Mr Justice Smith said. Peterson’s legal team said they were considering an appeal.

A jury found Peterson guilty earlier in the week of eight counts of fraud, forgery and furnishing false information in a case which saw him accused of artificially inflating the value of the fund’s investments , misleading investors into handing over their money.

The length of the sentence for Swedish-born Peterson, of Otham, Kent, surprised many in the legal profession as it is so much higher than most recent cases. Former UBS trader Kweku Adoboli only received seven years for his rogue trading.

The Serious Fraud Office trumpeted the sentence, with Jane de Lozey, its joint fraud head, saying: "The length of sentence handed down reflects the damaging and extended nature of Mr Peterson’s crime… That the SFO pursued this case demonstrates its determination to prosecute the top most tier of complex economic crime."

But investors who lost money from the fraud pointed out that the SFO had originally decided to drop the case in 2011. That decision was made just days after a Cayman Islands court ordered two Weavering directors to pay $111m in damages.

The SFO only reopened the case in 2012 after pressure from investors following their successfully litigation against Mr Peterson, his wife and two others in the High Court.

Weavering’s fund was marketed to investors as a low-risk, stable operation, but it collapsed in 2009 and it emerged its entire investment portfolio was a $637m set of interest rate swap trades with another firm controlled by Peterson. The fund started losing money soon after it was formed in 2003 and the two firms secretly started to make trades with each other without telling investors, "robbing Peter to pay Paul," as the SFO’s barrister claimed.

The SFO described how investors had been misled  to put $780m into the Weavering Macro Fund. When they started asking for their money back during hte financial crisis in 2008, there were no real assets to fund any repayments. The fund ceased trading on the Irish Stock Exchange in March 2009, liquidators were appointed and investors lost $536m.

During the fund’s existence, Peterson paid himself "handsomely", the SFO said – taking out £5.8m in pay for himself between 2005 and 2009.