Goldman Sachs, Morgan Stanley, Wells Fargo said to face $120M settlement over Archegos trades

ViacomCBS investors are seeking final court approval for a $120M settlement with Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC), accusing the Wall Street banks of failing to disclose conflicts of interest to Archegos Capital Management and a 2021 Viacom stock sale.

Serving as prime brokers, the three lenders helped both manage Archegos’s massive stock bets and act as underwriters for Viacom — now Paramount Global (PARA) — share sale in March 2021, Bloomberg reported.

Before its collapse, Bill Hwang’s Archegos amassed large derivatives positions in a number of media and tech companies, with Viacom among its largest.

The offering eventually flopped, though, and helped trigger a broader selloff in the stock, forcing Archegos to unwind its leveraged bets that left banks scrambling to contain billions of dollars in losses.

Shareholders, led by Frank Capital Partners, sued months after Archegos collapsed, claiming the banks failed to alert investors to their close ties to both Viacom and Hwang, Bloomberg reported

The suit alleged that the banks’ dual roles as Archegos’s prime brokers and as underwriters of the Viacom offering created a conflict of interest that should have been publicly disclosed.

While the banks still deny any wrongdoing, MS, GS and WFC have agreed to settle the claims to avoid what they described as the distraction and cost of prolonged litigation, the article said.

Lawyers for the investors formally asked for final court approval on July 1, with a hearing set for Aug. 5 in New York State court.