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Weil Defeats Fraud Claim in Investment Dispute for Morgan Stanley

On August 2, 2016, Weil won a summary judgment ruling for Morgan Stanley in New York state court that dismissed the remaining fraud claim in litigation commenced by a Russian billionaire and his Netherlands-based investment vehicle, Veleron Holdings, relating to a Veleron investment undertaken during the financial crisis. The Court granted Morgan Stanley’s motion from the bench following oral argument.

Earlier, in November 2015, Weil obtained a complete defense jury verdict in New York federal court for Morgan Stanley in a related private insider trading case brought by Veleron. In its arguments in support of summary judgment in the state court proceeding, Morgan Stanley argued that Veleron should have brought the fraud claim in the federal court case, and that under the principles of res judicata, Veleron was precluded from again seeking relief for alleged conduct involving the same facts and parties.

In these cases, Veleron alleged that Morgan Stanley was improperly short-selling stock of Magna International – a Canadian auto-parts manufacturer in which plaintiff had invested $1.5 billion just prior to the start of the financial crisis – based on purported insider information gleaned by Morgan Stanley from BNP Paribas, the lending bank that funded plaintiff’s investment in Magna, and that had entered into a series of derivative transactions with Morgan Stanley referencing Magna stock. Specifically, in September 2008, when BNP Paribas made a margin call on Veleron as Magna shares plummeted, Veleron asserted that Morgan Stanley learned from BNP that Veleron would not meet the margin call, and used that insider information as the basis for short-selling Magna shares. Veleron further claimed that this short-selling further drove down the price of Magna shares, leaving Veleron with nearly $80 million less than it needed to meet the margin call once its Magna shares were liquidated.

For more information on the jury trial victory, please follow this link.

The Weil team was led by Jonathan Polkes, co-head of Weil’s Litigation Department, and included partners Christopher Garcia and Paul Dutka, and associates David Byeff, Adam Banks, Ondrej Diaz, Amanda Shulak, Amy Suehnholz, and Irisa Chen.