Morgan Stanley bond trader banned by US regulators as Venezuela bond controversy heats up

Riot police were used to suppress protests yesterday in Venezuela's capital, Caracas (Source: Getty)

US regulators have banned a Morgan Stanley banker from markets after he hid millions of dollars of Venezuelan bond trades from his firm, as controversy mounts around the embattled regime’s efforts to raise finance.

The Financial Industry Regulatory Authority (Finra) today banned former Morgan Stanley Smith Barney trader John Batista Bocchino for concealing approximately $190m (£148m) in Venezuelan bond trades from the firm.

The bank had restricted trading in Venezuelan government debt because of regulatory risk as well as the possible hit to the bank’s reputation, but Bocchino hid the identities of his customers to make 300 trades, Finra said.

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The autocratic Venezulean regime has been desperately attempting to raise finance on international bond markets as the economy has crumbled. Nicolas Maduro’s government is on the verge of collapse, with protests this week in the capital, Caracas, turning violent.

The government has resorted to selling debt at knockdown prices through its central bank to avoid default on other obligations. The debt has been bought by several major banks, including Japanese investment bank Nomura and US bank Goldman Sachs.

Nomura bought $100m of Venezuelan government bonds this week, paying around $30m for the debt, according to the Wall Street Journal. Meanwhile Goldman Sachs received a similar discount on $2.8bn of bonds.

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Venezuela's opposition has urged international lenders to not help President Nicolas Maduro's government by financing debt. The president of the country's opposition-run national assembly accused the Wall Street lender of "aiding and abetting the country's dictatorial regime".

Maduro has drawn international condemnation for abuses of power and human rights violations, with riot police clashing with demonstrators on a regular basis.

Goldman Sachs said its asset-management arm acquired the bonds "on the secondary market from a broker and did not interact with the Venezuelan government".

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