The US Department of Justice's (DOJ) Antitrust Division has reopened an investigation into how banks managed the collapse of Archegos Capital in 2021, focusing on whether their actions involved illegal collusion, as reported by Bloomberg.
Prosecutors are scrutinizing emergency talks among banks that aimed to unwind $150 billion in Archegos-linked positions. While some banks, including Credit Suisse, UBS, and Nomura, coordinated liquidation efforts, others chose not to participate. The managed liquidation strategy resulted in significant losses, with Credit Suisse alone losing $5.5 billion before its eventual collapse.
The investigation comes as Archegos Founder Bill Hwang has been convicted of fraud and market manipulation, and was recently sentenced to 18 years in prison. Archegos' collapse exposed major flaws in banks' risk management, as the simultaneous liquidation of overlapping positions caused a market tailspin.
The probe will examine whether banks conspired to control share prices in their emergency discussions. “The Justice Department says nothing justifies coordinating your decision-making on something that’s going to impact the value of or the price of a stock,” said Antitrust attorney Lisa Phelan. While the banks did involve legal counsel in their discussions, the DOJ argues that legal advice does not necessarily shield firms from liability.
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