Hedge funds likely to stay in SFO spotlight despite collapse of Weavering investigation
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The Serious Fraud Office has closed a long running investigation into collapsed hedge fund Weaving Capital, stating that there wasn’t a reasonable prospect of conviction.
Mark Surguy, partner at international law firm Eversheds, believes hedge funds are likely to stay in the SFO spotlight despite the collapse of the case.
It is unlikely that the SFO’s investigations into a hedge fund will be the last that will cross its desk," says Mark Surguy, partner at international law firm Eversheds,. "The “dark art” of the somewhat secretive hedge fund trade generates spectacular profits for its wealthy clients, but at the risk of spectacular losses. The motive of greed and desperation caused by big losses will always mean fraud is in the wind. Who can forget the collapse of Long Term Capital Management? Although in the end there was no evidence of fraud, it very nearly brought the global economy down.
“The ongoing uncertainty in commodity, currency, bond and equity markets certainly increases the risks but also the rewards. It has been said that hedge funds in fact perform a very useful function in balancing extreme market swings. Bernard Madoff convinced many that his secretive hedge fund was a sure fire winner, only for the Ponzi scheme to famously unravel. It turned out he had never been in the market. Hedge fund fraud will cost innocent investors dearly and will be hugely complicated to unravel. Whether the SFO will have the resources and skills to pick over any future sophisticated business in which serious fraud is suspected remains to be seen, but there will be plenty of demand for specialist services in the private sector to advise the banks and investors who will be the principal victims.”
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