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SEC opens investigation into Archegos Capital trades that sparked $20 billion liquidation, report says

Published by Business Insider on Thu, 01 Apr 2021


<p><img src="https://static5.businessinsider.com/image/6064cfd5daf0f10018f994ee-2221/GettyImages-1170783560.jpg" border="0" alt="Allison Herren" data-mce-source="Tom William/Getty" data-mce-caption="Securities and Exchange Commission Commissioner Allison Herren Lee testifies during the House Financial Services Committee hearing on oversight of the SEC in Rayburn Building on Tuesday, September 24, 2019."></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><ul><li><strong>The SEC has opened an investigation into last week's Archegos Capital trades that sparked a $20 billion liquidation, according to <a href="https://www.bloomberg.com/news/articles/2021-03-31/sec-opens-investigation-into-archegos-trades-that-sparked-rout'sref=BLKWHazc">a Bloomberg report.</a></strong></li><li><strong>The routine investigation is in its early stages and the probe may not lead to allegations of wrongdoing.</strong></li><li><strong>Archegos Capital was hit with margin calls it couldn't meet last week, prompting several banks to liquidate its individual stock positions.&nbsp;</strong></li><li><strong><a href="https://newsletter.businessinsider.com/join/4np/10-things-opening-bell'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest'utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Sign up here for our daily newsletter, 10 Things Before the Opening Bell</a>.</strong></li></ul><hr><p>The US Securities and Exchange Commission has opened an investigation into Archegos Capital's Bill Hwang and the margin call trades <a href="https://markets.businessinsider.com/news/stocks/archegos-hedge-fund-liquidation-wall-street-credit-suisse-nomura-goldman-2021-3-1030254463">that led to a $20 billion liquidation of his family office,</a> according to <a href="https://www.bloomberg.com/news/articles/2021-03-31/sec-opens-investigation-into-archegos-trades-that-sparked-rout'sref=BLKWHazc">a report from Bloomberg.</a></p><p>The investigation is routine following such a high-profile market event, and the probe may not lead to any allegations of wrongdoing.</p><p>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 <a href="https://markets.businessinsider.com/stocks/viac-stock">ViacomCBS</a>, <a href="https://markets.businessinsider.com/stocks/bidu-stock">Baidu</a>, and <a href="https://markets.businessinsider.com/stocks/tme-stock">Tencent Music Entertainment</a>, among others.</p><p><a href="https://markets.businessinsider.com/news/stocks/archegos-capital-margin-call-20-billion-liquidation-8-stocks-plummeted-2021-3-1030254795">The trades led to extreme volatility in a handful of stocks on Friday,</a> with ViacomCBS and Discovery notching their biggest daily declines on record.</p><p>Banks like Goldman Sachs and Wells Fargo <a href="https://markets.businessinsider.com/news/stocks/wells-fargo-stock-price-no-losses-archegos-capital-margin-call-2021-3-1030260227">managed to escape potential losses</a> by quickly liquidating their exposure to Archegos, <a href="https://markets.businessinsider.com/news/stocks/nomura-takes-2-billion-loss-after-last-weeks-sell-off-2021-3-1030252569">but others like Nomura</a> and <a href="https://markets.businessinsider.com/news/stocks/credit-suisse-market-capitalization-archegos-hwang-margin-call-stock-sales-2021-3-1030253684">Credit Suisse are facing billions in potential losses from the trades.</a></p><p>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.&nbsp;</p><p>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 <a href="https://markets.businessinsider.com/news/stocks/who-is-bill-hwang-archegos-tiger-cub-christian-insider-trading-2021-3-1030255723">pleaded guilty on insider trading charges.&nbsp;</a></p><p><a href="https://markets.businessinsider.com/news/stocks/sec-opens-investigation-archegos-capital-trades-sparked-margin-call-2021-3-1030265726#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="https://www.businessinsider.com/what-if-jump-off-international-space-station-2018-6">What would happen if you jumped off the International Space Station</a></p>
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