Archegos Blowout Prompts US Justice Department Probe

The US Department of Justice has allegedly opened an investigation into the collapse of Bill Hwang’s Archegos Capital Management, which left a number of big banks in the US and Europe with over $10 billion worth of losses.

According to Bloomberg, which cited people familiar with the matter, DOJ prosecutors from Manhattan have issued requests for information to several of the banks that had dealings with Archegos. Although it remains unclear exactly what violations the DOJ is investigating, the Archegos blowout has drawn significant criticism from the financial community.

Archegos, which was run by former hedge fund manager Bill Hwang, made a series of highly leveraged bets using derivatives on numerous share prices. The firm was then unable to meet those margin calls, resulting in tens of billions of dollars in losses for the banks that helped finance the wagers, including Morgan Stanley, Credit Suisse, and Nomura.

The fallout rocked Wall Street, and raised concerns about how family-run offices, such as Hwang’s, are regulated. The collapse also shone a spotlight on dealings of the prime brokers that were inclined to conduct business with Hwang, despite the fact that he was under a trading ban in Hong Kong, and previously made a significant settlement with US regulators regarding insider trading charges.

Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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