US prosecutors have launched an investigation into the disaster surrounding the Archegos investment fund. Bloomberg News, based on informed sources, has reported that the US Department of Justice has requested information on the matter from some of the banks involved.
Archegos made risky investments that were largely funded with borrowed money. The fund had speculated strongly of higher prices for some stocks, such as those of media company ViacomCBS. When these securities became less valuable on the stock exchange, Archegos was no longer able to fulfill its financial obligations with the banks. They then sold the shares in large quantities as collateral, with losses amounting to $ 10 billion. Credit Suisse and Nomura, among others, were badly damaged.
It is not yet clear what suspicions the plaintiffs have about Archegos’ legal violations. Ministry of Justice spokesmen do not want questions answered. So far, the authorities have not accused the affected fund or banks of any wrongdoing.
The fall of Archegos has already caused a lot of criticism for the oversight of these mutual funds, the so-called family offices. They formally act as asset managers for wealthy families, which means that they are subject to less stringent oversight than, say, hedge funds. This made it possible for Archegos to take big, dangerous, unseen poses.
Archegos was run by Bill Hwang. It was already controversial prior to the disaster with the Archegos. Pleaded guilty to the insider trading ban in 2012 and settled $ 44 million.