LONDON – Nomura Holdings and Mizuho Financial Group are facing more than US$100 million (S$135 million) of potential losses tied to a series of failed stock trades made by investment fund All Blue Capital.

All Blue, led by trader Matt Novak, made a series of wrong-way short bets with multiple counterparties earlier in 2024, and was allegedly unable to settle the trades, according to New York legal filings and people familiar with the matter.

Two units of the fund were placed into liquidation in the British Virgin Islands in March, the filings show.

The fund’s inability to settle its bets triggered off a chain of events that have left Nomura nursing a possible loss of 14 billion yen (S$124 million), the people said.

Mizuho has separately claimed All Blue owes it US$19 million that it has yet to repay, according to the filings, which are part of an ongoing legal action that the Japanese bank has taken in New York.

The fund is contesting the lawsuit.

The size of the potential losses raises questions about the risk management practices at two of Japan’s largest banks.

Nomura has spent years repairing its internal controls after losing almost US$3 billion after the collapse of Archegos Capital Management in 2021, an affair that also saddled Mizuho with losses.

Spokespeople for Nomura and Mizuho declined to comment. A lawyer for All Blue said the company will vigorously defend itself against Mizuho’s claims.

All Blue

Mr Novak, a former emerging-markets trader at Commerzbank, is managing partner at All Blue, which invests across private equity, venture capital, real estate and other assets. The fund has also agreed to participate in a convertible debt offering tied to Digital World Acquisition Corp, the special-purpose acquisition company that merged with former US president Donald Trump’s social-media firm, according to the Financial Times.

In 2022, Mr Novak said he moved All Blue’s headquarters to Dubai, part of a growing class of hedge funds choosing to expand in the Middle Eastern business hub.

In April, Nomura said it had set aside funds to cover its potential loss. The provision weighed on the banking giant’s results in the first quarter, leading the European subsidiary to post a pretax loss for the period.

Mizuho lodged its claim against All Blue in New York in March, alleging the fund failed to settle its debts and evaded communication.

The fund, which denies any wrongdoing, has responded by describing the Japanese bank as a “disgruntled purported unsecured creditor” seeking to “cut in line ahead of other creditors and investors”, filings show. BLOOMBERG