Saturday 21 April 2018

Hedge-fund liquidator suing BNY Mellon firm

Grant Thornton takes legal action on behalf of Weavering investors

Roisin Burke

The liquidator of a bust Cayman Islands hedge fund is suing an Irish firm owned by BNY Mellon for millions.

Dublin-based BNY Mellon Investment Servicing International is being sued by Grant Thornton in its capacity as liquidator of Weavering Capital, a €450m-valued hedge fund that collapsed in 2009.

The Sunday Independent understands that the amount of damages being claimed by the liquidator on behalf of out-of-pocket Weavering investors is €200m at the low end but could be up to €500m if certain facts are proven.

A company called PNC Global Investment Servicing was bought by BNY in early 2010. This company provided a wide range of back office services to Weavering, according to court documents seen by this paper. One service was calculating its net asset value (NAV) on a monthly basis.

On December 4, Supreme Court Justice Clarke noted in relation to the proceedings: "That something went wrong seems almost certain. Weavering was in receipt of NAVs, which suggested that its investments had been successful and that its shareholders had very significant asset value." However, when investors sought their money back, "the picture painted by NAVs proved to be wholly false", he said.

If successful, the case could set a game-changing legal precedent, raising the threat of companies in Ireland's €2trillion hedge fund administration sector being put on the hook for losses when things go wrong. Back office hedge fund services employ hundreds here, mainly in Dublin's IFSC.

"We believe the issues being heard in this case are of vital importance in establishing the responsibilities of companies offering hedge fund administration services, and ensuring Irish law appropriately protects investors in hedge funds administered in this jurisdiction," a spokesman for Grant Thornton, liquidator to Weavering, said.

BNY acquired PNC Global Investment Servicing, now known as BNY Mellon Investments Servicing, for €1.77bn in early 2010.

Justice Clarke noted in December that PNC Global "provided a very wide range of administrative services to Weavering such that, in substance, the entire running of Weavering was, it would appear, conducted by PNC".

Weavering crashed when investors rushed to pull their money out after the collapse of Lehman Brothers.

At the time, PNC calculated Weavering's NAV as €386.8m. However, when investors sought their money back, it was discovered that there were insufficient funds to pay out. Its founder, Magnus Peterson, was charged with fraud offences by the authorities in Britain last month.

As reported previously by the Sunday Independent, Anglo auditors Ernst & Young were also the auditors of Weavering, and are being sued for alleged "deceit" and "negligence". The accountancy firms has stated that all allegations are unsubstantiated.

Sunday Indo Business

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