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October 11, 2021

Archegos faces SEC probe for potential market manipulation

By Verdict Staff

The collapsed hedge fund Archegos is being investigated by the US regulators for possible involvement in market manipulation.

The US Securities and Exchange Commission (SEC) is analysing the firm’s trading activity as part of the probe, Bloomberg reported citing people familiar with the development.

According to the sources, the SEC is also investigating whether Archegos withheld the size of its bets on public companies.

The firm has been given a subpoena by the regulator recently, they said.

The probe is also reviewing whether Bill Hwang’s firm purchased several stakes in the same companies across a number of banks in a bid to avoid public disclosure norms.

Representatives for Hwang and the SEC did not comment on the news.

Archegos used borrowed money to accumulate a concentrated portfolio of stocks worth over $100bn.

The fund collapsed in March this year when some of the stocks fell. This promoted margin calls from banks, which then divested Hwang’s holdings.

The collapse of Archegos hit lenders including Credit Suisse, Nomura, and Morgan Stanley, who lost over $10bn.

The impact of Archegos fiasco also led to internal investigations and the departure of several senior executives at these banks.

Credit Suisse, which took a $4.7bn hit from the collapse, replaced several executives, nixed executives’ bonuses, trimmed its dividend and halted share buybacks.

The exposure to Archegos also affected the Swiss banking giant’s Q2 2021 profit.

Meanwhile, the latest investigation is said to be a preliminary step by the SEC and is not likely to result in any enforcement action against Hwang, who hasn’t been accused of misconduct.

Last month, the SEC proposed a new rule that would need investment companies to disclose additional information on their proxy vote.

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