The Justice Department is reportedly investigating several major banks for allegedly conspiring during the liquidation of Archegos Capital Management, the ill-fated $36 billion investment firm led by Bill Hwang, who was convicted of fraud.
Federal investigators in San Francisco are looking into whether Credit Suisse, Nomura Holdings Inc. and UBS Group Inc. conspired to control prices and minimize combined losses of $10 billion during emergency talks to liquidate Archegos in March 2021. According to Bloomberg News.
The three banks agreed to sell some of their assets after suffering billions of dollars in losses, and Credit Suisse later collapsed and was rescued by Swiss rival UBS Group AG.
The Justice Department's Antitrust Division is considering whether it can prosecute the banks under the Sherman Act, a 134-year-old law designed to crack down on monopolies.
The Washington Post has reached out to the Justice Department, UBS and Nomura for comment.
Hwang, whose net worth once ballooned to about $20 billion, was convicted earlier this year of misleading banks and manipulating stock prices to artificially inflate the company's stock prices in order to borrow large amounts of money for concentrated investments.
Archegos, the family office founded by Hwang, a former hedge fund manager, collapsed three years ago after using a risky strategy known as a “total return swap,” in which investors borrowed large amounts to invest heavily in a few stocks without directly owning the securities.
Prosecutors said Archegos had $36 billion in assets at its peak and $160 billion in equity exposure.
When stock prices fell in March 2021, banks asked for additional deposits, but Archegos couldn't pay them.
Banks then sold the shares backing Hwang's swaps, wiping out an estimated $100 billion in shareholder wealth and billions in bank assets, including $5.5 billion in assets for Credit Suisse, now owned by UBS, and $2.9 billion for Nomura Holdings.
The 60-year-old Hwang had pleaded not guilty to one charge of conspiracy to organize crime and 10 charges of fraud and market manipulation.
The lawyers say the case is “the most aggressive open market manipulation case to date” brought by prosecutors.
Archegos Chief Financial Officer Patrick Halligan, who served as Hwang's vice president, was also convicted on similar charges. Both men face up to 20 years in prison.
The new scrutiny of banks is likely to further sour Wall Street sentiment toward the Biden-Harris administration, particularly its top antitrust officials.
Jonathan Cantor runs the Justice Department's antitrust division, and Lina Khan is chair of the Federal Trade Commission, but her heavy-handed policies have irked business leaders.
Messrs. Cantor and Kahn are particularly active in antitrust enforcement against large tech companies, including Google, Meta, Amazon and Apple.
With post wire
