Archegos prepares for insolvency prompted by bank claims - report

The family office has hired advisers to examine potential legal claims from banks and plan for a potential winding down of its business, the FT said.

Credit Suisse, Nomura, Morgan Stanley, UBS, MUFG and Mizuho lost more than $10bn as prime brokers to Archegos in March. The banks were forced to liquidate its positions in US companies such as ViacomCBS because it failed to meet margin calls.

Several of the banks are preparing to send Archegos "letters of demand" requesting payment before a legal claim, the FT said. Before doing so they want to finish closing Archegos's positions. Banks are also investigating whether the family office run by Bill Hwang withheld or provided incorrect information about its borrowing from other prime brokers, the FT said.

A person close to the situation told the FT: “There is a question mark over how much the banks are entitled to claim and whether the fund has any recourse for the way the banks behaved when they dumped the stocks. It will come down to what indemnity was in the loan and swap agreements … The banks are all going to claim as much as they possibly can.”

The episode has led to recriminations within banks and investigations by regulators over the amount of leverage offered to Archegos. Credit Suisse has parted company with several senior officials as well as managers and traders over its losses from Archegos and Greensill.