Ex-Hedge Fund Boss Peterson Banned From Finance Industry

  • Magnus Peterson banned while serving 13-year jail term
  • Peterson order comes days after Adoboli got similar penalty

Weavering Capital (UK) Ltd. founder Magnus Peterson became the second convicted financier in two weeks to be banned from the industry as a U.K. regulator sought closure in some of the country’s biggest scandals following the financial crisis.

Peterson, who was sentenced to 13 years in prison in January for a string of fraud offenses that cost his clients about $536 million, can’t take a position that involves any regulated activity, the Financial Conduct Authority said Monday. The ruling follows a similar one on Oct. 16 against Kweku Adoboli, the trader who was responsible for causing a $2.3 billion trading loss at UBS Group AG.

Peterson "defrauded investors who should have been able to trust him," Mark Steward, director of enforcement and market oversight at the FCA said in the statement. "Over a prolonged period he purposely used investors’ money to prop up his business, and then lied in order to cover up his deception."

The collapse of Peterson’s $600 million hedge fund prompted a six-year investigation by the U.K’s Serious Fraud Office. Peterson’s scheme was “clever, dishonest and sophisticated,” Judge Andrew Smith said when handing down his sentence in January.

Speedy Punishment

The FCA waited for Adoboli to serve three years in prison and a subsequent court ruling deporting him to his native Ghana before issuing the ban. The regulator moved more quickly with Peterson, meting out the penalty only nine months after sentencing.

"It’s an inevitable conclusion to a period when honesty in the City was thrown into question," said Shane Collery, a London-based trial lawyer specializing in fraud. "People who for no good reason involved themselves in dishonesty are now having to deal with the long-term consequences of it. Careers shattered unnecessarily."

A lawyer who represented Peterson at his trial declined to comment.

Ulf Magnus Michael Peterson, a native of Sweden, named Weavering after a village in Kent, England, near where he lived at the time. According to the SFO, he told investors he followed a low-risk strategy and invested in exchange-traded futures and options. After the fund lost money, Peterson sought to hide the losses with interest-rate swaps with a notional value of about $637 million, which couldn’t be redeemed or liquidated because the counter-party was another fund under his control, according to the SFO.

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