In 1998, defendant Magnus Peterson formed hedge fund manager Weavering Capital (UK) Limited (WCUK). He served as a director, chief executive officer and investment manager. One fund managed by WCUK, the open-end Weavering Macro Fixed Income Fund Limited (Fund), collapsed in the midst of the 2008 financial crisis. Peterson was accused of disguising the Fund’s massive losses by entering into bogus forward rate agreements and interest rate swaps with another fund that he controlled. In March 2009, the Fund suspended redemptions and went into liquidation when it could not meet investor redemption requests. At that time, WCUK went into administration (bankruptcy). WCUK’s official liquidators, on behalf of WCUK, brought suit against Peterson, his wife, certain WCUK employees and directors and others, seeking to recover damages for fraud, negligence and breach of fiduciary duty and seeking to recover certain allegedly improper transfers of funds by Peterson. After a lengthy hearing, the U.K. High Court of Justice, Chancery Division (Court), has allowed virtually all of those claims, ruling that Peterson did indeed engage in fraud. In a separate action, the Fund’s official liquidators recovered damages from Peterson’s brother, Stefan Peterson, and their stepfather, Hans Ekstrom, who served as Fund directors, based on their willful failure to perform their supervisory functions as directors. See “Cayman Grand Court Holds Independent Directors of Failed Hedge Fund Weavering Macro Fixed Income Fund Personally Liable for Losses Due to their Willful Failure to Supervise Fund Operations
,” Hedge Fund Law Report, Vol. 4, No. 31 (Sep. 8, 2011). This article summarizes the factual background and the Court’s legal analysis in the liquidators’ action against Peterson and others.