The fallout from the ongoing Archegos Capital Management implosion continues, as the US Securities and Exchange Commission summoned the major investment banks involved in the fire sale of more than USD20bn of assets that has left them licking their wounds. According to some sources globally, investment banks may lose over USD6bn from the downfall, with regulators fearing the event could still have a knock-on effect. Both Credit Suisse and Nomura have already warned of major losses due to their dealings with Archegos. The FT reported the Swiss bank could face losses as high as USD4bn alone. In a statement, the bank said ‘a significant US-based hedge fund defaulted on margin calls made last week’ meaning it and other banks were forced into ‘the process of exiting these positions’. Bank stocks fell last night in the US after Nomura lost nearly 17% and Credit Suisse dropped 14% after the news broke over the weekend.
On Friday, Discovery and ViacomCBS, two of the stocks involved in the fire sale were both down 27%, with Discovery sliding 45% on the week and Viacom down more than 50%. Other stocks involved were Farfetch, Baidu, Tencent Music, Vipshop and iQiyi.
The company broke its silence after the massive loss. ‘This is a challenging time for the family office of Archegos Capital Management, our partners and employees’ Karen Kessler, a spokesperson for the firm, adding ‘All plans are being discussed as Mr. Hwang and the team determine the best path forward’.
This is not the first time the company founder has been in the headlines for all the wrong reasons. In 2012 Bill Hwang pleaded guilty to insider trading on some Chinese bank stocks and agreed to criminal and civil settlements of more than $60 million.