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The Wall Street Journal: Disruptive Technology Solutions accuses Morgan Stanley of front-running block trade in Palantir stock

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An investor accused Morgan Stanley of leaking information about a large sale of shares of Palantir Technologies Inc., saddling it with millions of dollars in losses.

Morgan Stanley
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+0.33%

is at the center of a broad federal investigation into whether Wall Street banks told favored clients about pending sales, known as block trades, that they were hired to carry out quietly. The investor, Disruptive Technology Solutions LLC, and affiliated funds on Monday filed a demand for arbitration against the bank with the Financial Industry Regulatory Authority, a copy of which was viewed by The Wall Street Journal.

Disruptive alleges that Morgan Stanley and a senior executive there leaked information ahead of the fund’s sale of more than $300 million of Palantir shares
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in February 2021, resulting in “tens of millions of dollars in damages.” Disruptive is seeking compensatory and punitive damages.

The Securities and Exchange Commission and Justice Department are investigating whether banks tipped off clients to block trades, in which insiders sell big chunks of stock through a broker such as Morgan Stanley. Block trades tend to cause the stock in question to decline, so knowing about one ahead of time can help an investor gain on a short sale or avoid a loss by unloading shares that are already owned.

An expanded version of this report appears at WSJ.com.

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