The King of block trades is entangled in a US probe of Morgan Stanley

The King of block trades is entangled in a US probe of Morgan Stanley

Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Feb. 5, 2018. U.S. stocks remained down after recovering from steeper early losses, while European and Asian equities slumped.



When Frank Fu, a Cornell-educated engineer, opened his own hedge fund two years ago, he picked an unlikely niche for an introvert.

His CaaS Capital Management would focus on block trading, one of the last bastions of old Wall Street, where big slugs of stock are sold through person-to-person negotiation, even cajoling, rather than electronic venues. Many practitioners are bro-y -- the type who played college football. For Friday happy hours, Fu’s colleagues unzip their CaaS puffer vests and break out chess boards in a conference room.

Yet Fu, 39, soon managed to establish close ties with investment banks including Morgan Stanley, the juggernaut of the equities world. His pitch: CaaS would “partner” with them, positioning itself for preferential treatment. 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. In the firm’s first full year