Hwang and his private investment firm, Archegos Capital Management, were revealed to be behind the large block trades last Friday. His secretive bets that were heavily leveraged have triggered margin calls and led to the liquidation of positions worth $40 billion.
Part of Hwang’s portfolio was traded in blocks last Friday by Morgan Stanley, Wells Fargo &Co. and Goldman Sachs Group Inc. Bankers speculate that Archego’s net capital had reached more than $10 billion. As his $40 billion disposals keep unwinding, estimates of Archegos’s total position could be worth north of $50 billion or even more than $100 billion.
His fortunes were wiped in days as some of his holdings including Baidu Inc., Discovery Inc., GSX Techdu Inc., and ViacomCBA Inc. were sold off heavily by banks in recent days.
The former partner at Goldman Sachs said, “I’ve never seen anything like this — how quiet it was, how concentrated, and how fast it disappeared.”
The financial sector was weighed down by Hwang’s losses as systematic risk has reverberated from New York to Tokyo and beyond. So how could an individual take on such massive risks through so many banks under the radar of the regulators over the world?
The answer could constitute Hwang’s family office-style set up which required limited risk oversight and then leveraged his positions in companies through financial derivatives without ever having to disclose these massive holdings. Moreover, despite a record of attempted market manipulation and insider trading that drove him out of the hedge fund business a decade ago, global banks still see him as a lucrative client.
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