Hedge Fund Says Morgan 'Mishandled' Natural Gas Trades

Dec 1 2010 | 12:20pm ET

Hedge fund Peak Ridge Capital Group is returning fire in its fight with Morgan Stanley, filing a lawsuit that claims the investment bank "grossly mishandled" its trades.

The countersuit responds to a lawsuit filed last month in which Morgan Stanley accused Peak Ridge of missing margin calls and of taking "extreme risk," leaving the bank with $40.6 million in losses.

Bermuda-based Peak Ridge responded that Morgan Stanley took those losses after "wrongfully" seizing the natural gas portfolio and turning it over to an "inexperienced" trader on its proprietary trading desk. Peak Ridge estimates the losses at $32 million.

The hedge fund also accused Morgan Stanley of "arbitrarily and capriciously" imposing new margin requirements as the value of its portfolio dropped.

A Morgan Stanley spokesman said the firm stands behind its original lawsuit.

Peak Ridge is perhaps best known for briefly employing Brian Hunter, the natural gas trader whose bets destroyed Amaranth Advisors. During his stint at Peak Ridge, Hunter managed money for the fund in question in the Morgan Stanley lawsuits, 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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