Archegos Capital prepares for insolvency proceedings

Karthik Subramanian

Archegos Capital, the troubled capital management firm, is preparing for insolvency proceedings as banks that handled its funds are trying to recoup their losses from it.

Gain Capital's Peter Quick buys $280,000 of stock

The firm, which is supposed to be the family office of former Tiger Asia manager Bill Hwang, defaulted on payments for its margin calls leading to huge losses for the banks that handled its trades. The situation came about due to the big drop in the share value of ViacomCBS.

The capital management company had a lot of exposure to ViacomCBS and as its share price started falling, the banks demanded more and more collateral from Archegos Capital to cover the positions. The firm was not able to top up its account due to a lack of funds and this led to margin calls. It was one of the most shocking events of 2021 on the Wall Street.

Various banks around the world are expected to have lost around $10 billion due to this and this includes banks like Credit Suisse, Nomura Holdings and Morgan Stanley. As these banks demand the money back, Archegos is looking to find other legal options available to it to see how much damages are likely to be claimed and how these can be claimed.

Questions abound as to why the firm was given such a long rope by the banks and why they did not seek to close the trade positions at the first hint of a loss. It is only due to the fact that these banks chose to wait in the hope that the firm would return back the money that the losses began to pile up and crucial time was lost waiting for funds that never came in from the firm.

It is also to be noted that retail traders are seldom given this liberty and at the end of the day, it is these traders who are left holding the bag. Their accounts get closed at the first hint of trouble and these losses suffered by the various banks also need to be paid for, in one way or the other, by the retail traders and investors.

The lessons learned from the market crash in 2008 seem to have been conveniently forgotten and it is generally felt that the regulators like the SEC need to crack their whip in such situations so that the banks do not cross the line and are held to account. It remains to be seen what kind of action is going to be taken by the regulators and the fallout is likely to be closely monitored by the traders and the investors.

Read this next

Digital Assets

Bybit under pressure from Ontario regulator after being forced out of the UK

Bybit has recently been forced to close its operations in the United Kingdom following the ban on Crypto CFD products earlier this year. 

Digital Assets

XRP, BTC, ETH, ADA, DOGE rebound despite being ‘rat poison’ to nearly half of surveyed by JP Morgan

While JP Morgan and its partners are institutionally staying back from the crypto markets, the investment bank is very much into blockchain technology.

Industry News

FTX and MLB partner together for brand awareness and innovation

FTX, one of the largest crypto exchanges in the world that has been on an expansion spree, has announced that it has tied up with Major League Baseball (MLB) in the US for brand awareness.

Digital Assets

Polygon (MATIC) and Aave grant recipient tie up to incentivise new users with rewards

Polygon (MATIC), a Layer 2 solution on Ethereum, has tied up with Aave grant recipient RabbitHole to incentivise new users for making deposits into Polygon.

Digital Assets

John McAfee, software pioneer and a big crypto supporter, dies in Spanish jail

John McAfee, the founder of the anti-virus software which was a household name a couple of decades back and a huge crypto enthusiast, has died in a Spanish jail on the same day that a court allowed him to be extradited to the US.

Industry News

TraderEvolution Global partners with TradingView: Brokers to enjoy direct access

The multi-asset platform is now connected to TradingView’s network of venues, liquidity pools, and asset classes 

Digital Assets

Visa and Paypal invest heavily into $300 million blockchain fund

Visa and Paypal, behemoths that have been known supporters of the blockchain domain, have invested in Fund V of Blockchain Capital.

Opinion

FX Trading is a business: If you want results, act like a professional. Go Prime of Prime!

Trading the markets is a business. It is no wonder that the ones that see it as gambling are willing to trade against the house, but retail traders that want results, they must act like professionals.

Digital Assets

Celsius acquires MVP workshop as it looks to build more on crypto

Celsius, one of the largest cryptocurrency lending and rewards earning platforms, has announced that it has acquired the development division of MVP Workshop as it looks to expand its development team.