(I’m reporting this as our constructive, nation-building media only reported this story very briefly when it became public last week. Wonder why?)
“Morgan Stanley secretly, deceptively and wrongfully invested the investors’ principal in very risky underlying assets,” according to the complaint.
The investments were described to Heong Leong as synthetic collateralized debt obligations based on the performance of major corporations and sovereign nations with high credit ratings, according to the complaint.
Morgan Stanley instead tied the notes to much riskier investments in real estate-related companies and troubled Icelandic banks, including Glitnir Bank HF and Kaupthing Bank HF.
Morgan Stanley issued the notes through a special-purpose entity it controlled called Pinnacle. Italso positioned to profit when the notes failed because it had entered into swap transactions with the noteholders through another affiliated entity, Morgan Stanley Capital Services Inc.
“When Morgan Stanley’s ’rigged’ underlying assets failed, money from customers was transferred to MS Capital,” Hong Leong said in the complaint.