He Built a $10 Billion Investment Firm. It Fell Apart in Days.

Until recently, Bill Hwang sat atop one of the biggest — and perhaps least known — fortunes on Wall Street. Then his luck ran out.

Mr. Hwang, a 57-year-old veteran investor, managed $10 billion through his private investment firm, Archegos Capital Management. He borrowed billions of dollars from Wall Street banks to build enormous positions in a few American and Chinese stocks. By mid-March, Mr. Hwang was the financial force behind $20 billion in shares of ViacomCBS, effectively making him the media company’s single largest institutional shareholder. But few knew about his total exposure, since the shares were mostly held through complex financial instruments, called derivatives, created by the banks.

That changed in late March, after shares of ViacomCBS fell precipitously and the lenders demanded their money. When Archegos couldn’t pay, they seized its assets and sold them off, leading to one of the biggest implosions of an investment firm since the 2008 financial crisis.

Almost overnight, Mr. Hwang’s personal wealth shriveled. It’s a tale as old as Wall Street itself, where the right combination of ambition, savvy and timing can generate fantastic profits — only to crumble in an instant when conditions change.

in a 2019 speech. “I couldn’t go to school that much, to be honest.”

Grace and Mercy Foundation, a New York-based nonprofit that sponsors Bible readings and religious book clubs, growing it to $500 million in assets from $70 million in under a decade. The foundation has donated tens of millions of dollars to Christian organizations.

“He’s giving ridiculous amounts,” said John Bai, a co-founder and managing partner of the equity research firm Fundstrat Global Advisors, who has known Mr. Hwang for roughly three decades. “But he’s doing it in a very unassuming, humble, non-boastful way.”

But in his investing approach, he embraced risk and his firm ran afoul of regulators. In 2008, Tiger Asia lost money when the investment bank Lehman Brothers filed for bankruptcy at the peak of the financial crisis. The next year, Hong Kong regulators accused the fund of using confidential information it had received to trade some Chinese stocks.

In 2012, Mr. Hwang reached a civil settlement with U.S. securities regulators in a separate insider trading investigation and was fined $44 million. That same year, Tiger Asia pleaded guilty to federal insider-trading charges in the same investigation and returned money to its investors. Mr. Hwang was barred from managing public money for at least five years. Regulators formally lifted the ban last year.

ViacomCBS announced plans to sell new shares to the public, a deal it hoped would generate $3 billion in new cash to fund its strategic plans. Morgan Stanley was running the deal. As bankers canvassed the investor community, they were counting on Mr. Hwang to be the anchor investor who would buy at least $300 million of the shares, four people involved with the offering said.

But sometime between the deal’s announcement and its completion that Wednesday morning, Mr. Hwang changed plans. The reasons aren’t entirely clear, but RLX, the Chinese e-cigarette company, and GSX, the education company, had both spiraled in Asian markets around the same time. His decision caused the ViacomCBS fund-raising effort to end with $2.65 billion in new capital, significantly short of the original target.

ViacomCBS executives hadn’t known of Mr. Hwang’s enormous influence on the company’s share price, nor that he had canceled plans to invest in the share offering, until after it was completed, two people close to ViacomCBS said. They were frustrated to hear of it, the people said. At the same time, investors who had received larger-than-expected stakes in the new share offering and had seen it fall short, were selling the stock, driving its price down even further. (Morgan Stanley declined to comment.)

By Thursday, March 25, Archegos was in critical condition. ViacomCBS’s plummeting stock price was setting off “margin calls,” or demands for additional cash or assets, from its prime brokers that the firm couldn’t fully meet. Hoping to buy time, Archegos called a meeting with its lenders, asking for patience as it unloaded assets quietly, a person close to the firm said.

Those hopes were dashed. Sensing imminent failure, Goldman began selling Archegos’s assets the next morning, followed by Morgan Stanley, to recoup their money. Other banks soon followed.

As ViacomCBS shares flooded onto the market that Friday because of the banks’ enormous sales, Mr. Hwang’s wealth plummeted. Credit Suisse, which had acted too slowly to stanch the damage, announced the possibility of significant losses; Nomura announced as much as $2 billion in losses. Goldman finished unwinding its position but did not record a loss, a person familiar with the matter said. ViacomCBS shares are down more than 50 percent since hitting their peak on March 22.

Mr. Hwang has laid low, issuing only a short statement calling this a “challenging time” for Archegos.

Kitty Bennett contributed research.

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Investment Firm’s Collapse Put Unseen Risks on Full Display

After the implosion of a little-known investment firm saddled banks around the world with billions of dollars in losses last week, one big question is being asked all over Wall Street: How did they let this happen?

The answer may stem from the way the firm, Archegos Capital Management, with ample assistance from at least half a dozen banks, made bets on stocks without actually owning them.

Archegos used esoteric financial instruments known as swaps, which get their name from the way they exchange one stream of income for another. In this case, Wall Street banks bought certain stocks Archegos wanted to bet on, and Archegos paid the banks a fee. Then, the banks paid Archegos the stocks’ returns.

These swaps magnified the fund’s buying power, but they also created a two-pronged problem. Archegos was able to build up much more influence over the share prices of a few companies, including ViacomCBS and Discovery, than it could afford on its own. And because there are few regulations about these types of trades, it was under no disclosure obligations.

was embroiled in an insider-trading case under his leadership. But it used leverage — essentially, trading with borrowed money to amplify its buying power — perhaps as much as eight times its own capital, some Wall Street analysts calculated.

In this case, leverage showed up in the form of swap contracts. In return for a fee, the bank agrees to pay the investor what the investor would have gotten from actually owning a share over a certain period. If a stock rises in price, the bank pays the investor. If it falls, the investor pays the bank.

Archegos focused its bets on the share prices of a relatively small number of companies. They included ViacomCBS, the corporate parent of the country’s most-watched network; the media company Discovery; and a handful of Chinese technology firms. The banks it used to buy swaps held millions of shares in ViacomCBS alone.

Normally, big institutional investors are required by the S.E.C. to publicly disclose their holdings of stock at the end of each quarter. That means investors, lenders and regulators will know when a single entity holds a big ownership stake in a company.

But S.E.C. disclosure rules don’t usually cover swaps, so Archegos didn’t have to report its large holdings. And none of the banks — at least seven that are known to have had relationships with Archegos — saw the full picture of the risk the fund was taking, analysts say.

the most recent data available, according to the Bank for International Settlements, an international consortium of central banks.

Mitsubishi UFJ Securities Holdings Company, a unit of the Japanese financial conglomerate, reported a potential loss of around $270 million.

Analysts say the damage was relatively contained, and while the losses have been large for some players, they’re not big enough to pose a threat to the broader financial system.

But the episode will most likely reinvigorate a push to expand the regulation of derivatives, which have been associated with many prominent financial blowups. During the 2008 crisis, the insurance giant AIG nearly collapsed under the weight of unregulated swaps contracts it wrote.

The cascade of problems that began with Archegos was only the latest example of derivatives’ ability to increase unseen risk.

“During the financial crisis of 2008, one of the biggest problems was that many of the banks didn’t know who owed what to whom,” said Tyler Gellasch, a former S.E.C. lawyer who heads the Healthy Markets Association, a group that pushes for market reforms. “And it seems that happened again here.”

Matthew Goldstein contributed reporting.

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Banks Face Billions in Losses as a Bet on ViacomCBS and Other Stocks Goes Awry

Mr. Hwang had worked under the billionaire hedge fund titan Julian Robertson at Tiger Management, making him one of the firm’s famous alumni, or “cubs,” when he started his own fund, Tiger Asia. But in 2012, he faced an insider-trading investigation; securities regulators said Tiger Asia had used confidential information to bet against the shares of Chinese stocks, and had manipulated other shares.

Mr. Hwang entered a guilty plea to wire fraud on behalf of Tiger Asia and paid millions of dollars in fines while also accepting a five-year ban on managing public money as a result of the settlement with the S.E.C. He reorganized the firm as a family office, meaning it was no longer managing outside money, and renamed it Archegos Capital Management; archegos is a Greek word meaning leader or founding father, and is used in the Bible to refer to Jesus.

“It’s not all about money, but it’s about long term,” Mr. Hwang said in a 2018 video in which he discussed his faith and work. “God certainly has a long-term view.”

According to four people familiar with the matter, Mr. Hwang had recently built large holdings in a small number of stocks, including ViacomCBS and Discovery, which also operates the cable channels TLC and the Food Network, and the Chinese companies RLX Technology and GSX Techedu. Those bets unraveled spectacularly in just a few days last week.

Last Monday, shares of RLX Technology, an e-cigarette company, tumbled sharply after Chinese regulators presented potential new regulations on the industry. RLX securities listed in the United States, called American depositary receipts, tumbled 48 percent. The next day, GSX Techedu, a tutoring company that has been a target of short sellers in recent years who claimed the firm’s sales numbers were overstated, fell 12.4 percent.

On Wednesday, ViacomCBS sold a batch of shares on the open market to raise money to finance its new streaming businesses, exacerbating Mr. Hwang’s situation. His firm began fielding queries from worried banks. Lenders at Goldman Sachs urged Archegos to pare its exposure, said two people familiar with those conversations. But Archegos pushed back, saying the battered stocks would recover, one of the people said.

By Friday morning, when Archegos was unable to post additional “margin,” Morgan Stanley and Credit Suisse, two of Archegos’s main lenders, had declared the fund to be in default, four people briefed on the matter said. Their action paved the way for Goldman Sachs and others to do the same. Soon, huge blocks of stocks were on offer.

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Credit Suisse and Nomura Feel the Sting from Archegos’ Fall

The case is a test of shareholders’ ability to sue over claims of investment fraud. The pension funds have sought to sue as a class over Goldman’s statements, saying that they believed the claims of honesty. Goldman has argued in its latest brief that the investors are resorting to “guerrilla warfare” and aren’t providing “serious legal arguments.” The bank says that an investor victory would lead to a barrage of future lawsuits over “general and aspirational statements” of the kind made by “virtually every public company in America.”

How a former S.E.C. commissioner thinks the court will respond to Goldman’s arguments: “I expect the court to be troubled by the claim that companies cannot be held accountable for saying that clients come first and then acting otherwise,” Robert Jackson Jr., who served on the commission from 2018 to 2020 and is now an N.Y.U. law professor, told DealBook. (The justices probably won’t agree with the claim that making a company “mean what it says” will lead to a tsunami of meritless lawsuits, he added.) Regardless, Goldman is right that the stakes are high, he said, since the case will probably decide whether shareholders can “hold corporate insiders accountable when they tell investors one thing and do another.”


What made last night different from all others? A diverse group of comedians, celebrities and venture capitalists doesn’t normally gather for a virtual Passover Seder on a chat app. But that is what happened last night on Clubhouse, which hosted what was possibly the world’s first hunt for a nonfungible token version of afikomen, the broken matzo ritualistically hidden for children to find and claim a prize.

Like an NFT, an afikomen is a unique object. “It feels like a reasonable updating of tradition,” said fnnch, the San Francisco street artist who created images of broken matzo for the event. NFTs are digital assets that represent sole ownership of things that are otherwise easily replicated — in this case fnnch’s pictures. He predicted that NFTs would eventually include a technological lock preventing copies from displaying, which would make owning them much more like possessing a physical artwork.

One afikomen NFT is being auctioned off to support Value Culture, a nonprofit that sponsors art, education and spiritual projects to foster community engagement. The other was nestled within the profile of someone in the Clubhouse room and given away for free. (Hints about to how to find them lay in the Passover tale that is traditionally told at a Seder.)


The annual college basketball championship — and betting bonanza — known as March Madness has been full of upsets, on both the men’s and women’s sides, blowing up many brackets.

If you no longer have hope of winning the office pool, here’s another contest to think about: March’s maddest markets. We’ve come up with a mini-tournament of seeded matchups to determine which mania is the most manic.

How would you bet? Let us know: dealbook@nytimes.com.

Stonks division

No. 1 SPACs vs. No. 4 penny stocks

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