Two managers of Weavering Capital fund arrested in a probe for its deals with BVI company
On Friday, May 15, Britain’s Serious Fraud Office arrested two managers of the collapsed hedge fund Weavering Capital, which is now investigated in connection with artificial inflation of its value by derivative transactions.
Liquidators of Weavering Macro Fixed Income hedge fund (Cayman Islands) are now investigating the swaps where the counterparty was an offshore firm Weavering Capital Fund Limited, registered in the British Virgin Islands, and controlled by the fund’s founder and chief executive.
The Weavering Macro Fixed Income Fund (CI) was working mainly with high-net-worth clients. Actually, it started voluntary liquidation after it failed to meet its investor demands for withdrawals. Its main asset was a series of derivative transactions valued at $637.1 million, while a derivative counterparty, which was described as a BVI entity “effectively under common control” with Weavering Capital UK, had a net worth not exceeding $50 million.
The Irish Stock Exchange listing of the Cayman Islands-registered fund was suspended, and by the opinion of the fund representatives it had “revealed a related party transaction in the form of a large interest rate swap position of a material amount where the counterparty is a company controlled by a related party”.
Now, the main issue of the British investigators into the fund is whether the connection between the Cayman fund and BVI fund should have been disclosed under the rules of the Irish Stock Exchange (ISE)composite triple beat, as a related party transaction.
In the last time, the hedge fund industry was influenced very much by a number of high-profile scandals, the most notable of which is scandal with the U.S. financier Bernard Madoff alleged of large-scale fraud and pyramid scheme.