DOJ Targeting King of Block Trades
DOJ Probe Update: DOJ Targets King of Block Trades CaaS Capital Management Hedge Fund

King of Block Trades, CaaS is now one of the hedge funds being investigated by the DOJ.

The last hedge fund we heard was being investigated was Citadel, which was confirmed by Bloomberg.

Since then, we’ve had no update until now.

And we’re going to bring you up to date with the market news.

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Welcome to Franknez.com – hedge funds are lining up one by one in a massive investigation being conducted by the DOJ. Here’s the latest update.

Let’s dive right into it!

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Who is the “King of Block Trades”?

Wall Street

The King of Block Trades is the name dubbed to the hedge fund CaaS by Bloomberg.

So, then who is CaaS?

CaaS (Capital as a Service) is a New York-based hedge fund with over $650 million in assets under management.

Block trading is when financial institutions sell one another a ton of stock through negotiations rather than through an electronic venue.

While block trading is not illegal, market activity proves the misuse of this strategy could be at large.

Morgan Stanley and Goldman Sachs are two of the biggest banks currently being investigated for connections to block trading and colluding with hedge funds.

CaaS managed to establish close ties with Morgan Stanley only two years of opening.

Prospective investors say CaaS has boasted to them of quickly becoming one of the biggest U.S. funds dedicated to block trading, getting a first look at deals and gaining entry to virtually every IPO in the country, Bloomberg.

The firm saw a 76% return its first year in business.

Now the hedge fund is one of many being scrutinized in a sweeping U.S. probe into how Wall Street firms handle large orders.

Banks make extra fees from block trading

Morgan Stanley

Morgan Stanley can earn extra fees helping hedge funds cash out, offering shares to investment firms with desks handling blocks, as well as specialized shops such as CaaS, deemed the King of Block Trade.

Market participants say that some traders have been known to bet against shares after getting calls from these bankers.

This prompts the question of whether the trade acted on non-public information, also known as insider trading.

The financial system has a variety of rings where everyone involved has to benefit, even if it causes system risk to the market.

This is what regulators are looking into.

A little more background on CaaS

CaaS

CaaS was founded in May of 2019 by Frank Fu.

Born in Shanghai, he came to the U.S. where he earned a bachelor’s degree in research and engineering, and a master’s in financial engineering.

He later landed at Susquehanna International Group, where he spent two years trading options.

Some of you might recall Susquehanna is one of the top 10 financial institutions shorting AMC Entertainment.

He then moved to hedge fund Laurion Capital Management.

Looking for additional ways to make money, he started wading into block trades around 2012.

Within a few years, he established himself as one of the top rainmakers at the firm and a key player in providing liquidity to banks.

The King of Block Trades has told prospective investors they had ties to about 30 banks. 

When Goldman Sachs, Morgan Stanley, and Credit Suisse were forced to sell billions of dollars of shares from the Archegos incident, Fu was there to buy.

 A regulatory filing showed CaaS scooped up more than $440 million of the stocks that Archegos had been betting on.

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DOJ launches an expansive criminal investigation