BusinessDay said that according to Australian daily the Age, Dan Ritchie is accused by Mr Waterhouse of leaking confidential information about "awful" upcoming losses for the brokerage firm and warning him to ditch long positions in the market as share prices were about to fall.
Mr Ritchie is also alleged to have said Merrill planned to "short the hell" out of shares to cover the expected losses for Mr Waterhouse's How Trading account.
However, in testimony before Victoria's supreme court, former Merrill Lynch executive John Laws said he did not believe the former head of equities was still with the investment bank.
Merrill Lynch itself has declined to confirm or deny if it still employs Mr Ritchie. Lawyers for the firm said Mr Ritchie had also denied the allegations.
BusinessDay said documents obtained from the Securities and Derivatives Industry Association show Mr Ritchie resigned as a director of the industry body five days after mediation between Merrill's Australian subsidiary Berndale Securities and How Trading broke down.