Summary List Placement
- The SEC has opened an investigation into last week’s Archegos Capital trades that sparked a $20 billion liquidation, according to a Bloomberg report.
- The routine investigation is in its early stages and the probe may not lead to allegations of wrongdoing.
- Archegos Capital was hit with margin calls it couldn’t meet last week, prompting several banks to liquidate its individual stock positions.
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The US Securities and Exchange Commission has opened an investigation into Archegos Capital’s Bill Hwang and the margin call trades that led to a $20 billion liquidation of his family office, according to a report from Bloomberg.
The investigation is routine following such a high-profile market event, and the probe may not lead to any allegations of wrongdoing.
Archegos Capital was hit with several margin calls last week that it was unable to meet, prompting several banks that had prime brokerage relationships with the family office to liquidate its stock positions in names like ViacomCBS, Baidu, and Tencent Music Entertainment, among others.
The trades led to extreme volatility in a handful of stocks on Friday, with ViacomCBS and Discovery notching their biggest daily declines on record.
Banks like Goldman Sachs and Wells Fargo managed to escape potential losses by quickly liquidating their exposure to Archegos, but others like Nomura and Credit Suisse are facing billions in potential losses from the trades.
Archegos Capital was trading on extreme leverage via swap transactions that few market participants knew about because as a family office, it is exempt from registering with the SEC and reporting its holdings.
This isn’t the first time Hwang has been the subject of an SEC investigation. In 2012, Hwang and his former hedge fund Tiger Asia Management pleaded guilty on insider trading charges.