Report: SEC Opens Preliminary Investigation Into Archegos’ Bill Hwang After $30 Billion Stock Liquidation

Topline

The Securities and Exchange Commission has opened a preliminary investigation into Sung Kook “Bill Hwang,” whose Archegos Capital Management roiled markets by defaulting on risky margin calls last week and prompted $30 billion in losses, Bloomberg reported Wednesday.

Key Facts

Bloomberg noted that the regulatory review is routine after a market incident like the one that occured last week, and that it is in its preliminary stages and will not necessarily lead to allegations of wrongdoing.

Because Hwang’s Archegos is a family office, it was not required to meet certain SEC reporting requirements that in other cases could have raised red flags for regulators.

Hwang settled with the SEC in a 2012 insider trading and market manipulation case. 

His former firm, Tiger Asia Management, pleaded guilty.

Key Background

Archegos defaulted on highly leveraged margin calls last Friday, triggering a fire sale of some $30 billion in stocks including ViacomCBS, Baidu, Tencent Music Entertainment and Discovery Communications as banks rushed to unwind their positions. Credit Suisse and Nomura—two of the firm’s brokers—warned this week of “significant losses.” Goldman Sachs and Morgan Stanley were also forced to liquidate the positions they held for Archegos, but did so more quickly than other banks and as a result saw smaller losses, the Wall Street Journal reported Tuesday.

Big Number

$10 billion. That’s how much big banks could lose as a result of their Archegos liquidation trades, JPMorgan analysts said this week. 

What To Watch For

After last week’s rout, Wall Street investors are beginning to worry that big banks plan to crack down on the risky margin debt that sparked Archegos’ defaults, which could prompt more liquidation sales if investors are forced to exit their positions.

Further Reading

The Firm Behind The $30 Billion Firesale Shaking Financial Markets Disclosed Almost Nothing (Forbes)

Here’s Why Wall Street Is Worried About More Forced Selloffs After Friday’s $30 Billion Fire Sale (Forbes)

Nomura And Credit Suisse Warn Of ‘Significant’ Losses Following Archegos Fire Sale, Banking Stocks Tumble (Forbes)

Archegos Capital’s Bill Hwang Put $590 Million In His Charitable Foundation. Here’s Where It Went. (Forbes)

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