Weavering And The Preferred Custodian

Plenty of ink has been spilled following the ruling of the Cayman Islands Court of Appeal on 18 November 2016 in the Weavering preference case SEB v Conway and Walker. The case is of obvious interest to insolvency experts, but it is also of wider relevance, highlighting the binding nature of a fund's net asset value, and the risks of serving as a custodian or nominee investor for an underlying client. The facts of Weavering are now notorious. In short, an open-ended Cayman Islands investment fund (whose controlling mind was United Kingdom-based investment manager Magnus Peterson, and whose directors were Magnus' brother and father-in law) defrauded its investors by painting a picture of positive growth using worthless swaps with an affiliated company, and causing net asset values to be calculated on fictitious unrealised gains from the swaps.