A Morgan Stanley fund has become the biggest shareholder in Livedoor, the internet start-up that was at the centre of one of Japan’s most controversial financial scandals in recent history.

Hybrid Capital Second, a Morgan Stanley investment vehicle, increased its stake in Livedoor from 12.76 per cent to 18.15 per cent in March, superseding Takafumi Horie, the company’s founder, who has 17.24 per cent.