The Justice Department is investigating several large banks for allegedly colluding during the liquidation of convicted fraudster Bill Hwang’s ill-fated $36 billion investment firm Archegos Capital Management, according to a report.
Federal investigators in San Francisco are looking into whether Credit Suisse, Nomura Holdings and UBS Group conspired with one another in order to control prices and minimize losses totaling $10 billion while conducting emergency talks to liquidate Archegos in March 2021, according to Bloomberg News.
The three lenders reached agreement to sell parts of their exposure after losing billions. Credit Suisse later collapsed and had to be rescued by its Swiss rival UBS Group.
The Justice Department’s antitrust division is looking into whether it can charge those banks under a 134-year-old statute, the Sherman Act, which was initially crafted in order to crack down on monopolies.
The Post has sought comment from the Justice Department, UBS and Nomura.
Hwang, whose net worth at one point ballooned to around $20 billion, was convicted earlier this year of defrauding those banks and manipulating stock prices in order to borrow large sums of money to make concentrated bets, thus artificially inflating their value.
Archegos, a family office founded by the former hedge fund manager Hwang, went belly up three years ago after using a risky strategy known as “total return swaps” — or borrowing heavily to make large bets on a small number of stocks without owning the securities outright.
At its peak, prosecutors said Archegos had $36 billion in assets and $160 billion of exposure to equities.
When stock prices fell in March 2021, the banks demanded additional deposits, which Archegos could not make.
The banks then sold the stocks backing Hwang’s swaps, wiping out an alleged $100 billion in value for shareholders and billions at the banks, including $5.5 billion for Credit Suisse, now part of UBS, and $2.9 billion for Nomura Holdings.
Hwang, 60, had pleaded not guilty to one count of racketeering conspiracy and 10 counts of fraud and market manipulation.
His lawyers have said the case is the “most aggressive open market manipulation case ever” brought by prosecutors.
Hwang’s deputy at Archegos, CFO Patrick Halligan, was also convicted of similar charges. They face up to 20 years in prison for each charge.
The renewed scrutiny of the banks is likely to further sour sentiment on Wall Street toward the Biden-Harris administration, particularly its top antitrust officials.
Jonathan Kanter heads the Justice Department’s antitrust division while the Federal Trade Commission is chaired by Lina Khan, whose aggressive policies have irked business leaders.
Kanter and Khan have been particularly keen on enforcing antitrust laws against large tech companies such as Google, Meta, Amazon and Apple.
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