Morgan Stanley's role in the collapse of Archegos Capital Management deepened a probe by U.S. authorities into Wall Street's lucrative market for block trades, Bloomberg News reported, citing people with knowledge of the matter.

The investment bank lost nearly $1 billion last year when Bill Hwang's Archegos failed to meet margin calls, forcing several investment banks including Morgan Stanley to attempt recouping losses by liquidating shares and assets.

Imploded

Block trades were already under scrutiny when the highly leveraged family office imploded, the report said on Wednesday.

Federal investigators began focusing on trades carried out by Morgan Stanley a day before the wider sell-off wiped out $35 billion from the value of Archegos' holdings, the report added.

That led to a wider inspection of multiple trades brought to market by Morgan Stanley, and whether its clients illegally profited from trading in advance of those transactions, according to the report.

It also led to scrutiny of Pawan Passi, a senior executive at the bank who spoke about various block trades, the report said.

Morgan Stanley, whose shares were down 2.3%, did not immediately respond to a Reuters request for comment.

SEC Looking Into Front Running

Reuters reported on Tuesday that the U.S. Securities and Exchange Commission was probing whether financial executives broke the rules by tipping off hedge funds ahead of large sales of shares.