(Bloomberg) -- The reason Morgan Stanley gave for the dismissal of senior currencies trader Thiago Melzer was defamatory, an arbitration panel found.

A Financial Industry Regulatory Authority panel of independent arbitrators said that the reason set out on a regulatory filing for Melzer’s exit should be “deleted in its entirety.” Instead, it should show that the bank terminated him because of its “perception of his supervisory actions which were not related to any securities, customer interaction or sales practices,” according to a copy of the September judgment obtained by Bloomberg.

“The panel recommends expungement based on the defamatory nature of the information,” the filing said.

Melzer, who oversaw trading in derivatives called FX options, was suspended by Morgan Stanley in 2019 and left the firm two years later after a lengthy internal review. In a 2021 filing to Finra, the New York-based bank stated at the time that his dismissal was because of allegations about his “conduct in providing others guidance” for valuing positions and use of a “non-firm approved communication platform.” 

Melzer filed an expungement request last year as part of a claim submitted via Finra’s dispute resolution arm. The markets watchdog provides the forum but has no part in deciding awards, which is left instead to independent arbitrators chosen by the parties in disagreement, according to spokesman Ray Pellechia.

He also sought $11.1 million from Morgan Stanley in the claim, to which the bank responded with its own claim for $132,000 in “compensatory damages,” according to the judgment. The two parties later settled for an undisclosed amount but left the dispute over the language in the filing up to Finra to decide, the judgment shows. 

Melzer declined to comment through a spokesman. Tom Walton, a spokesman for Morgan Stanley in London, declined to comment.

Morgan Stanley hired Melzer in 2007 and promoted him repeatedly as the bank became a force in FX options, a lucrative corner of the currency market. The operation was roiled by millions of dollars of losses and suspicions of wrongdoing in 2019, however, prompting the firm to oust him and a group of other traders. 

Morgan Stanley had probed whether the FX options business was involved in so-called mismarking, an industry term for the improper valuing of trades. Melzer had denied any involvement in the practice, Bloomberg reported last year. 

Melzer has since set up Upon Global Capital, a Sao Paulo-based hedge fund that bets on global macroeconomic trends. The Upon Global Macro FIC fund is up 20% since the beginning of the year after fees, according to an investor document. 

Recently, the fund increased its short position on the S&P 500 Index, taking the view that a worsening economic outlook should trigger downward revisions to corporate earnings. It also boosted wagers that gain from declines in the euro, while also betting on falling long-term rates in the US.

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