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We had not heard anything about this fund until a week ago, and neither had 99.9% of our subscribers. But now all traders and investors know about it. And on Monday, the US regulator (SEC) held an emergency meeting with representatives of leading US investment banks.
S&P 500
So what really happened? Archegos Capital Management is a family investment firm founded by former Tiger Management analyst Bill Hwang in 2013.
Before joining Archegos, Hwang founded the hedge fund Tiger Asia Management in New York. In 2012, Hwang pleaded guilty to insider trading in Chinese bank shares and agreed to a $44 million fine. The Securities and Exchange Commission in the US said he had used confidential information obtained in a private placement to short sell shares in three Chinese banks.
And this man was entrusted with billions of dollars that he invested in the stock markets through Archegos Capital Management. Not only that, the fund used a very aggressive policy, buying stocks with as much leverage as possible. And banks were happy to lend him this money despite the founder’s reputation.
But something went wrong. A fall in the value of a couple of stocks on which the fund was speculating had a domino effect. Suddenly it turned out that the fund’s net position had turned negative. The banks rushed to close out its positions on margin calls. As a result, some $20 billion worth of shares were traded on Friday, which severely depressed share prices. Which means that the fund took a huge loss that it will never be able to recoup. Who will pay for it? The US and European banks that lent to Archegos Capital Management.
How much are we talking about? There are figures of net losses ranging from 2 to 5 billion dollars. But no one knows for sure. Everyone is worried that there may be more stories about large hedge fund margin calls that took place on Friday.
Who was the beneficiary of what happened? Suddenly it turns out to be Bitcoin. Against a backdrop of falling stock and futures markets, the first cryptocurrency has rallied steadily upwards.
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