Arrests follow collapse of Weavering funds

Arrests have been made in connection with the collapse of London based hedge fund Weavering Capital which went into administration in March with its main macro fund owing investors more than $600 million (£395 million).

Two men were taken to a London police station for questioning by the Serious Fraud Office (SFO) and the City of London police. No charges have yet been made.

In a statement the SFO said the investigation was focusing on interest rate swap transactions between the Weavering Macro Fund and Weavering Capital Fund, a company registered in the British Virgin Islands, which inflated the value of the Macro Fund. The fund had been valued at $639 million at the end of 2008 but almost the entire amount was dependent on the value of the interest rate swaps.

Weavering went into administration in March 2009 after its leading fund, based in the Cayman Islands, was hit by a wave of investor redemptions. PricewaterhouseCoopers, appointed as liquidator to the fund, previously said it had received redemption requests of $223 million since early November 2008 and could only meet $90 million of those requests.

The SFO was called in shortly after the fund was liquidated and decided to launch a formal investigation in May.

Weavering was set up in 1998 by chief executive Magnus Peterson, a Swedish financier who had been the head of trading at the Swedish bank SEB. Peterson sat on the board of Weavering Capital in London as well as the Weavering Capital Fund.