Morgan Stanley sacks traders over US$100m securities valuation fraud

Business | 29 Nov 2019 2:51 pm

Morgan Stanley fired or placed on leave at least four traders over an alleged mismarking of securities that concealed losses of between US$100 million (HK$780 million) and US$140 million, according to people with knowledge of the matter, Bloomberg reports.

Morgan Stanley is investigating the suspected mismarking, which was linked to emerging-market currencies, said the people.

Tom Walton, a spokesman for the New York-based firm, declined to comment.

The traders who have been identified as part of the inquiry include Scott Eisner and Rodrigo Jolig, both based in London, and two senior New York-based colleagues, Thiago Melzer and Mitchell Nadel, the people said.

Eisner, Jolig, Melzer and Nadel didn’t respond to requests for comment.

Their ultimate employment status isn’t yet clear, but at least some of them are leaving the bank, the people said.

Melzer was given responsibility for foreign exchange and emerging-markets Americas trading in March, while Nadel runs macro trading in the Americas, including rates and currencies.

Eisner was managing orders for the Central and Eastern Europe, Middle East and Africa currency book, known as CEEMEA, according to his LinkedIn profile.

In so-called mismarking, the value placed on securities doesn’t reflect their actual worth.

The scope of the inquiry at Morgan Stanley includes currency options that give buyers the right to trade at a set price in the future, enabling them to both speculate and hedge against potential losses.

Dealing in foreign-exchange options surged 16 percent to US$294 billion per day in April, according to the most recent data from the Bank for International Settlements.

Morgan Stanley’s currency options desk has struggled this year amid a slump in the volatility that generates profits for traders, even in the more unruly emerging markets, according to a person with knowledge of the performance.

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