It was October 10 2008, and US markets had opened nearly 10 per cent down on one of the darkest days of the financial crisis. Senior Morgan Stanley executives among the guests at a villa in Cap d’Antibes, south of France, were in little mood for their host’s annual dinner, as the bank’s shares continued to plummet after opening 27 per cent down. Talk mounted that the bank would be the next to fail. “Everybody was trying to have a fun dinner but it was horrific,” said one participant. “I thought [the Morgan Stanley guys] were going to slit their wrists. Everybody at that event had a lot to lose.”

Trying hardest to keep a brave face was the host, who was still sitting on part of a big investment in Morgan Stanley. This man was Suleiman Kerimov, a secretive Kremlin-connected Russian tycoon. For more than a year before the crisis, he had been building stakes in many of the west’s biggest financial institutions.

Kerimov, a native of Dagestan, a republic in Russia’s North Caucasus, had invested billions of dollars into the western financial system. With the help of huge loans, he had built significant stakes in Morgan Stanley, Goldman Sachs, Deutsche Bank and other positions in Credit Suisse, Fortis and RBS, according to five senior western bankers with knowledge of the investments. In some cases, they claimed, the stakes went over 3 per cent.

The mostly untold story of how Kerimov quietly amassed these stakes, lost his shirt, then rebuilt his fortune again, is a tale of integration into the western financial system that would have seemed unimaginable when the Soviet Union collapsed 20 years ago. But it is also a cautionary tale of the greater systemic risks being built into global financial markets. Western banks’ hunt for capital has taken them into uncharted waters – where investors are often enigmas and appetite for risk and leverage can be as outsized as the billions being generated almost overnight.

Kerimov, 45, has always eschewed ...