The latest Wall Street scandal centers on Bill Hwang and his investment firm – Archegos Capital Management, which allegedly used famous banks such as Nomura or Credit Suisse for swaps and so-called difference contracts, without ever owning physically traded assets. In the US, investors who have a stake of more than 5% in a listed company are required to disclose their position and subsequent transactions. However, it seems that they are not obliged to do the same in the participations obtained through these derivative instruments, such as those used by Archegos, writes Bloomberg.
These practices allowed Archegos to hide its assets, which were largely obtained on the basis of swaps, and managers, such as Hwang, were able to collect significant holdings from listed companies without having to declare them.
The forced liquidation of more than $ 20 billion in assets has drawn the attention of US authorities to shadow financial instruments that could be used for large stakes in companies.
Archegos’ findings have reverberated around the world after banks such as Goldman Sachs and Morgan Stanley forced Hwang’s company to sell investments worth billions of dollars.
Mass sales have shaken companies from Baidu to Viacom and forced Nomura and Credit Suisse to acknowledge that they are facing significant potential losses on their exposures.
US stock markets fell lower on Monday, with the DOW index down 0.36%, while the S&P 500 fell 0.65% and the Nasdaq 1.19%. Credit Suisse shares fell 14.8%, while Nomura lost 16.33%.
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