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One of the biggest Wall Street cases in years was brought Wednesday — essentially, over duping Wall Street firms.
The civil case brought by the Securities and Exchange Commission against Bill Hwang, the investor who lost billions of dollars, alleged that Hwang’s Archegos Capital Management was able to move the stocks of companies — including what was then ViacomCBS
PARA,
and Baidu
BIDU,
— by using swaps they only were able to receive by deceiving lenders.
“The margin and capacity extended by Archegos’s Counterparties served as the fuel for its manipulative trading. However, Archegos could not rely on its Counterparties to provide it with ever greater margin and capacity unabated, particularly given Archegos’s propensity to stretch its available trading capacity with Counterparties to its limits,” said the SEC.
What Hwang and his lieutants did was deliberately mislead firms to obtain increased trading capacity, the SEC said. “As Archegos intended, these deceptions fraudulently convinced its Counterparties that Archegos’s overall positioning was less concentrated and more liquid than it actually was,” the SEC said.
Archegos assets swelled from $4 billion to over $36 billion in just under six months, the SEC said.
While no Wall Street firms were named in the case, banks including Credit Suisse
CS,
and Nomura
8604,
have taken billions of dollars in losses over extending credit to Hwang.
By March 2021, Archegos controlled over 70% of GSX Techedu , over 60% of the class A shares of Discovery, and over 50% of IQIYI
IQ,
and ViacomCBS.
Archegos engaged in what was dubbed a “brazen” scheme to manipulate the market through aggressive buying in the premarket and last 30 minutes of the day, the SEC said.
According to reports, Hwang and Patrick Halligan, the chief financial officer of Archegos, were arrested by federal prosecutors.
Hwang, Halligan, William Tomita and Scott Becker were named in the SEC complaint.
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