DOJ said to beef up scrutiny of banks hit by Archegos collapse
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The U.S. Department of Justice is beefing up its investigation into banks that collectively lost billions of dollars following the meltdown of Bill Hwang’s Archegos Capital Management in 2021, according to a Tuesday media report.
The news comes just a couple of months after Hwang had been convicted of fraud and market manipulation that led to the hedge fund managing over $36B in assets at its peak. Archegos collapsed when it couldn’t repay its lenders. Banks, including Credit Suisse, Nomura (NYSE:NMR), Morgan Stanley (MS) and UBS (NYSE:UBS), suffered more than $10B in losses. Shareholder losses in Archegos’ portfolio companies totaled over $100B.
Prosecutors in the Justice Department’s criminal antitrust division have revived a stalled probe into how Hwang’s lenders unwound over $150B in trades made by his family office, Bloomberg reported, citing people familiar with the matter.
Following Hwang’s fraud trial, the San Francisco office of the DOJ has renewed its investigation, concentrating on the urgent meetings banks held in March 2021, the people added. At these gatherings, participants discussed strategies for a coordinated sell-off of their client’s portfolio to limit their financial exposure.
The DOJ is probing whether there was collusion or a conspiracy to collude to control prices in those discussions, the article said. Credit Suisse, Nomura (NMR) and UBS (UBS) were said to have reached a managed liquidation agreement to offload parts of their Archegos exposure. Other banks like Goldman Sachs (GS), Morgan Stanley (MS) and Deutsche Bank (DB) had explored such a deal, only to decide against it.