Pawan Passi has handled the communication operations for Morgan Stanley since his debut after graduation in 2004, emerging to become a primary negotiator with venture capitalists trading large blocks of shares, a market the firm controls on Wall Street. However, in November, his seat at Morgan Stanley’s head office opposite Times Square became vacant, and rumours started to circulate.
Passi had been placed on leave by the bank. The feds were prowling the area. Furthermore, Morgan Stanley and Passi are also embroiled in a wide-ranging US investigation investigating if bankers are inappropriately alerting traders to large-scale stock sales that might cause price swings, according to sources familiar with the investigation.
Block trading is one of the only Wall Street companies where contacts still influence deal flow, and investigators are now dissecting the linkages that cover a wide variety of organisations. Nobody has been charged with any wrongdoing. “The equity capital trading universe is one of the last realms of the super-high-end wining and dining worlds in finance,” stated James Koutoulas, the Chief Executive Officer (CEO) of Typhon Capital Management, adding that he has reservations about the bargains that could ensue.
Officials at predominant Wall Street hedge funds, including Andrew Liebeskind at Citadel’s Surveyor Capital and Jon Dorfman at Element Capital Management, to money managers at smaller firms concentrating on block trades, which include executive officers at CaaS Capital Management and Islet Management, and even a former employee at Segantii Capital Management, are among those whose communications are being sought, according to the people. According to the persons, bankers include Felipe Portillo, a risk executive in Credit Suisse Group AG’s equity capital markets group, Michael Daum, a partner at the Goldman Sachs Group Inc., and Michael Lewis, Barclays Plc’s head of US stocks cash trading. Lewis was a Morgan Stanley employee until 2018.
The list of members does not actually prove their importance in the investigation, however it does reflect the wide net that regulatory authorities and prosecutors have woven in tracing out block-trading operations on Wall Street.
According to information from the probe, investigators are extremely keen to know if any money managers put well-timed wagers preceding block trades which have the potential to push prices down. Moreover, if the case is so, it’s uncertain who, if any person is involved, could be charged of disclosing or operating on any significant non-public information.
