Investment broker Merrill Lynch has denied allegations that it used foreknowledge of an “awful” results announcement from its New York office to short A$55 million ($44.3 million) worth of blue-chip Australian stocks, including mining giant BHP Billiton and the Commonwealth Bank.
Australian daily the Age reports a witness statement by David Waterhouse, who had an options trading account named How Trading with the Merrill subsidiary Berndale Securities, which claims an executive at the firm said it would “short the hell out of stocks” to more than match his options positions.
He also claims to have been told How Trading’s losses would be contained at A$5 million and if the shorting paid off, Berndale would pay his money back.
The claims would amount to the biggest insider trading case in Australian corporate history.
Merrill Lynch said it “completely rejects” the accusations, adding that it has launched proceedings to recover over A$9 million in outstanding debts from How Trading and Waterhouse.
How Trading is counter-claiming A$4 million in damages for unjust enrichment and breach of contract.
Merrill Lynch became the world’s biggest brokerage when it merged with Bank of America in 2008.
D.C.