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The US Department of Justice has reportedly launched a probe into this spring’s dramatic implosion of Archegos Capital Management, which slammed some of the world’s biggest banks with more than $10 billion in losses.
Federal prosecutors sent requests for information to some of the banks that conducted business with the massive but little-known family office run by disgraced financier Bill Hwang before its epic collapse in March, according to a Bloomberg report.
Hwang relied on massive leverage and risky derivatives to take concentrated positions. When the massive bets he’d made on ViacomCBS and Discovery went south, he failed to meet margin calls and his brokers tried to liquidate their positions — his collateral — as quickly as possible.
The move spurred a frantic, market-melting fire sale that left Credit Suisse with more than $5 billion in losses and Japanese bank Nomura with $3 billion in losses. US banks like Goldman Sachs were quicker to get out of their positions and escaped the incident largely unscathed.
In the wake of the Archegos collapse, regulators have sought to understand how one person could have controlled so much stock without disclosing it. The Securities and Exchange Commission opened an investigation Hwang’s actions just weeks after the incident. The new SEC Chairman Gary Gensler has said he may look to expand regulation of family offices — possibly by requiring that they disclose their positions.
People close to Hwang are quick to note there’s no evidence he did anything illegal and say they are unaware of any criminal investigations. The probes being conducted now may be just to gather more details on the events and possibly introduce stricter rules for family offices, according to the report.
A spokesperson for Archegos did not respond to request for comment. A spokesperson for the DOJ did not respond to request for comment.
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