Lawsuit Filed Against MORGAN STANLEY

Soreide Law Group has filed a FINRA arbitration on behalf of our client (Claimant) against:

MORGAN STANLEY (Respondent).

The Claimant resides in Washington state and is employed by Meta/Facebook. On or about 2021, according to the lawsuit, the Respondent pitched the Claimant the Meridian Group an internal management team at MORGAN STANLEY that specializes in covered call options to manage large, concentrated position. The lawsuit states that the Claimant transferred all his Facebook/Meta shares to the Meridian Group at Morgan Stanley, through Michael Wagner who ran the covered call strategy. According to the lawsuit, Meridian Group at Morgan Stanley allegedly pitched a conservative proactively managed covered call strategy that would generate an extra 2-4% additional income per year. The lawsuit alleges the Claimant then put his full faith and trust into the Respondent given that they are professional money managers.

According to the lawsuit, the Respondent’s main selling point to the Claimant allegedly was “DO NOT GET STOCK CALLED”. Every Wall Street firm had a buy rating on Meta, including MORGAN STANLEY, knowing it could rocket much higher to the upside. Allegedly, the Respondent was adamant that the Claimant would never lose a single share.  The lawsuit alleges the Claimant told the Respondent he was bullish on the stock and wanted to pass it along to his children.

Selling covered calls on a stock is essentially shorting the underlying position, betting that it will not rise above the strike price of which it was sold. By 2024, according to the lawsuit, the Claimants Meta position had risen to over $2 million, and the gain was over $1.4 million. As the stock continued to climb, the lawsuit alleges the Respondents continued to sell covered calls (shorting the position) for a nominal amount of additional income which exposed the Claimant to potential tax consequences and loss of upside on the stock and his shares being called away. This strategy, the lawsuit alleges, was continued into 2025 with no foreseeable offramp and no one at MORGAN STANLEY allegedly could find a solution that wouldn’t cost the Claimant millions of dollars to close the option or lose his stock.

The lawsuit states that in 2025, Meta continued to climb to new all-time highs creating an over $1 million net loss on the option position, meaning if the Claimant were to close out his covered call short positions he would lose most of his Meta stock to cover, miss all the upside, and get hit with an large tax bill. The lawsuit claims that this was not the conservative strategy, as allegedly agreed upon, and the Respondents allegedly mismanaged this position for the promise of 2-4% additional income in return and charging the Claimant over $50k in fees

According to the lawsuit, in September of 2025, the Claimant left Meridian Group at Morgan Stanley and went back to his previous firm. When the Claimant left MORGAN STANELY he had 3,800 shares of Meta stock covered by a strike price of $290 a share (at the time the stock was $750). This represented an unrealized loss of $1,748,000. His new advisor issued a line of credit to buy out the 38 underwater contracts (sold in 100 shares lots so covering 3,800 shares of Meta) and used that line of credit for $1,440,219.41 (which accrue $3,500 a month in interest) to buy out the contracts. The Claimant then had to sell 596 shares of Meta and come up with $475,000 in cash to pay down some (not all the margin balance). In total, the Claimant has been damaged by over $2 million, the actual loss, not including lost opportunity, fees, taxes and margin interest.

The lawsuit alleges that MORGAN STANLEY and their representative’s actions have caused the Claimant damages of approximately $2,000,000.00. The lawsuit alleges negligence, breach of fiduciary duty, and negligent supervision. No answer has yet to be filed and it is anticipated that MORGAN STANLEY and the Meridian Group will deny any wrongdoing.

To discuss this article or any other securities issues, contact Soreide Law Group and speak to an experienced securities lawyer at no cost:  888-760-6552.

Soreide Law Group represents our clients nationwide before FINRA on a contingency fee basis, no fee if no recovery.