Sarah Hansen, 31 March 2021
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.
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.
$10 billion. That’s how much big banks could lose as a result of their Archegos liquidation trades, JPMorgan analysts said this week.
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.