Morgan Stanley Faces Trial Over Mike Ashley's $1 Billion Margin Call

Morgan Stanley faces trial over $1 billion margin call involving billionaire Mike Ashley. Frasers Group lawsuit reveals internal tensions.

Feb 21, 2024 - 07:23
Feb 21, 2024 - 07:23
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Morgan Stanley Faces Trial Over Mike Ashley's $1 Billion Margin Call
Morgan Stanley Faces Trial Over Mike Ashley's $1 Billion Margin Call

A high-stakes trial in London is shedding light on internal communications at Morgan Stanley regarding a significant margin call placed on billionaire Mike Ashley. Frasers Group Plc, owned by Ashley, has taken legal action against both Morgan Stanley and Saxo Bank after the banks issued a massive margin call related to Ashley's derivatives trades involving Hugo Boss AG. While Saxo Bank has settled its part, Frasers continues to pursue legal recourse against Morgan Stanley.

The margin call, described by Morgan Stanley employees as "ridiculous" and "crazy," was aimed at pushing Frasers out of its position in Hugo Boss. Documents submitted to the court before the trial reveal Frasers' argument that the call was unfair and motivated by Morgan Stanley's negative sentiments towards Ashley. Simon Smith, the former head of EMEA investment banking at Morgan Stanley, reportedly expressed a "visceral reaction" to the prospect of doing business with Ashley, according to emails cited by Frasers' lawyers.

Morgan Stanley, however, contends that the margin call was based on stress tests and standard practices, with no irrationality involved in the decision-making process. The bank asserts that Ashley's trade positions posed significant risks, leading to the margin call.

The trial also highlights the strained relationship between Morgan Stanley and Frasers, with the former allegedly hesitant to engage with Frasers due to Ashley's reputation, among other reasons. Frasers is seeking damages of around $50 million, while Morgan Stanley has vowed to vigorously defend against what it considers to be a baseless claim.

As the trial unfolds, it promises to provide further insights into the dynamics between financial institutions and high-profile clients, as well as the complexities of margin calls and derivatives trading in the financial industry.

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