Morgan Stanley Sues Hedge Fund Peak Ridge Over Default

Nov 9 2010 | 10:35am ET

Morgan Stanley has sued a hedge fund that allegedly defaulted on margin calls and left the investment bank holding the bag for $40.6 million in natural gas losses.

According to Morgan Stanley's lawsuit, filed yesterday in Manhattan federal court, Peak Ridge Capital Group failed to maintain proper margin requirements despite the "extreme risk" it had taken. The bank said it took a series of steps "in order to reduce risk and stabilize the book" in June, but to no avail: The Peak Ridge Commodities Volatility Master Fund Segregated Portfolio had already lost some 39% of its value on June 4 alone.

Peak Ridge, which is perhaps best known for briefly employing Brian Hunter, the natural gas trader whose bets destroyed Amaranth Advisors, did not comment on the lawsuit.

During his stint at Peak Ridge, Hunter managed money for the Commodities Volatility fund, which managed triple-digit returns in 2008, its first year. But Hunter left the firm after only a few months that year.

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