Archegos Capital Management - How to burn $20 billion overnight!

[Lucius]

A few days ago, news emerged that a large US fund (Archegos Capital Management) had caused quite a stir in the financial market, and that large banks such as Credit Suisse, Goldman Sachs, Deutsche Bank and Japan's Nomura were in trouble, and the latter has already admitted a loss of as much as $2 billion. Namely, due to non-fulfillment of obligations towards investors, a forced liquidation of as much as $20 billion took place, which included shares of companies such as Tencent, Baidu, ViacomCBS, Discovery and some others.

What is interesting is that this fund is owned by Bill Hwang who has had problems with the law in the past due to insider trading, but as it usually happens he only paid the fine. This just shows that not everything is so ideal in the world of funds and stocks, but also that this crisis has not had a negative impact on the price of Bitcoin.

A massive margin call affected a little-known family office last Friday, incurring billions of dollars in losses for certain banks involved and jolted the overall volatility of the broader market.
Archegos Capital Management’s leveraged bets in ViacomCBS blew up and ignited a whopping $20 billion wave of forced liquidations at a slew of Wall Street banks, some of which face losses that could be “highly significant.”

[stompix]

In 2012, Hwang pleaded guilty to insider trading of Chinese bank stocks and agreed to pay $44 million to settle civil allegations.
Archegos Capital Management is a family investment vehicle founded by former Tiger Management analyst Bill Hwang in 2013

I remember that even if you reach an agreement admitting guilt and thus avoiding a prison sentence insider trading comes with a ban on activities for at least a few years, how the hell was he able to run an investment fund just one year later?

Hwang also has a charity called “The Grace and Mercy Foundation” with $500 million in assets.

Quite the unusual foundation > CNBC video
Hopefully, he has pissed off enough guys so we won't be seeing him starting another fund in 2022.

This just shows that not everything is so ideal in the world of funds and stocks, but also that this crisis has not had a negative impact on the price of Bitcoin.

Forget Bitcoin, seems that nobody cares about $20 billion, even the markets are still in the green, probably a fund with hundred and not tens of billions collapsing might stop this bull run for a while, till then everyone is so optimistic about the future it is clear it's going to end badly, where do they think they will find trillions after trillions to keep this thing moving.

[Lucius]

This is a strange world we live in, and once again it is confirmed that money can buy everything, even reputation. I would forbid such people for life to engage in any trade (except to sell potatoes and the like), but the system is obviously designed to benefit just such people.

Yes a really weird charitable foundation, it seems to have been set up just to avoid capital gains taxes. Wealthy people have top lawyers, and they know how to find every hole in the law and that’s nothing new - those who have the most money generally find a way to pay the least taxes.

Given that trillions have become something that is literally scattered everywhere, it seems that one such incident has not disturbed the global market in the slightest - the situation in the world seems to be very favorable if $20 billion does not mean much.

I would not bet that this is the end for Hwang, such people do not give up - if not in the US, he will find himself a new destination again.

[int03h]

Using great leverage and overinvesting in different stocks increases the risk of trading. Burning a hedge fund's accounts overnight is unlikely unless they have had losses for days and they accumulate to become a large loss enough to liquidate their assets. I guess they didn't cut their losses and hoped to reverse the situation until they lost all their money.

In the past, there were many investment funds in many fields with losses. So a loss investment fund is considered not too surprising. Surprisingly, they manage like a gambler when they spend so much money on a position.

[stompix]

Youtube recommendations algorithm at its best, this thing appeared on my front page in the morning:
Deutsche Bank Dodges $4 Billion Archegos Hit
Article here

Later on, I will check zerohedge, the guys there are probably committing seppuku hearing that, DB has been for almost a decade the bank they are praying each day to come crashing down with all those derivatives but somehow it keeps going on and the sum is dwindling each year.

Interesting stuff on the move, but the fact I'm mentioning this here is because people should understand that even in this business there is no permanent agreement between the players, there are no such things as banks on one side and the rest on another one, and they all act in unison. No, there is harsh competition between them, and there are winners and losers like in any other business.

[Lucius]

Who would say that DB has such a good nose for business, or maybe it would be better to say better insider information - because it is obvious that they had information that something bad was going to happen. I completely agree that in a world where big money is at stake, everyone plays for themselves, but it's not bad to have influential friends who know how to be of great help.

I am not able to read the article (without a subscription I have already used one free today), but I can see from the video that the SEC will be involved in the whole thing, which is quite logical - so it will be interesting to see if there will be any sanctions. Probably someone will pay the fine again, that's how it usually happens.

[fiulpro]

A few days ago, news emerged that a large US fund (Archegos Capital Management) had caused quite a stir in the financial market, and that large banks such as Credit Suisse, Goldman Sachs, Deutsche Bank and Japan's Nomura were in trouble, and the latter has already admitted a loss of as much as $2 billion. Namely, due to non-fulfillment of obligations towards investors, a forced liquidation of as much as $20 billion took place, which included shares of companies such as Tencent, Baidu, ViacomCBS, Discovery and some others.

What is interesting is that this fund is owned by Bill Hwang who has had problems with the law in the past due to insider trading, but as it usually happens he only paid the fine. This just shows that not everything is so ideal in the world of funds and stocks, but also that this crisis has not had a negative impact on the price of Bitcoin.

A massive margin call affected a little-known family office last Friday, incurring billions of dollars in losses for certain banks involved and jolted the overall volatility of the broader market.
Archegos Capital Management’s leveraged bets in ViacomCBS blew up and ignited a whopping $20 billion wave of forced liquidations at a slew of Wall Street banks, some of which face losses that could be “highly significant.”

This is very interesting. I actually had no idea about this news but 20 billion is a huge amount. I do think it did bring a dip in the overall economy and at the same time fine ? I do think it should be understood that Fine won't work in these cases, the same situation will arise again. This does show us that Bitcoins is way more stronger now as compared to years before and thus it has its on circle and therefore these highs and lows did not affect it. Which is great since am always worried about the interconnection of the economy and bitcoins.

-Making them pay fines won't do a thing. This matter should be investigated thoroughly and at the same time the judicial system should decide a different route. Plus I do think that it was a systematic strategy which was well though by not one but many companies at the same time. That's how they play. I am extremely interested what the further investigation will find.

[doomloop]

A few days ago, news emerged that a large US fund (Archegos Capital Management) had caused quite a stir in the financial market, and that large banks such as Credit Suisse, Goldman Sachs, Deutsche Bank and Japan's Nomura were in trouble, and the latter has already admitted a loss of as much as $2 billion. Namely, due to non-fulfillment of obligations towards investors, a forced liquidation of as much as $20 billion took place, which included shares of companies such as Tencent, Baidu, ViacomCBS, Discovery and some others.

I do not think that him being guilty of insider trading back in the day and him getting this much richer overnight because of what the companies did is different. Those companies took out a short and failed to pay the margin call and that is why it ended up being 20 billion dollars, that is basically the same thing Wallstreetbets did as well, it could be profitable or not right now, but it had a moment when real wall street companies lost as much as 7 billion dollars (estimates go as much as 70 billion total but that's not proven, 7 billion is guaranteed notified) because some redditors decided to fuck with wall street.

This is why I think it is quite important that we do not care what's going on with wall street's financials, they can lose all of their money all I care, they will get bailed out with our money anyway and that's why I hate them and why I am in crypto.

[Lucius]

This is why I think it is quite important that we do not care what's going on with wall street's financials, they can lose all of their money all I care, they will get bailed out with our money anyway and that's why I hate them and why I am in crypto.

Bitcoin is an alternative, but it is not immune to what is happening in a markets like Wall Street, because as you yourself say everything they lose, ordinary people end up paying for it - which means they gamble and know very well that they can never lose actually. Let's call it a problem or whatever someone wants, but the guys from WS have already started gambling seriously with BTC, and we know that they don't give up on anything when it comes to profit - so we should always follow what's going on in their backyard. There is an old saying that says "know your friend, your enemy even better".


One article that gives a little more detailed insight into how the whole situation developed -> Timeline - Diary of a meltdown: how the Archegos Capital fire sale went down

[amishmanish]

About the charity. The article says that he donated $20Mn and avoided paying capital gain taxes on an investment in Amazon stocks. So can someone explain how does this work? If he donated 20Mn of his own money to the charity and then got a rebate against that, then isn't that how this works everywhere?

I mean he did give away 20 Mn to charity right? Or does all of that money somehow plows back to the donor? Almost all of these rich Americans donate to charity. So isn't that a philanthropic thing? How do they benefit out of it as some of you seem to suggest?

Also, those "Total return swaps" mentioned in the article sound a whole like Wall street's version of Schnorr Signature transactions. Hiding the amounts and still allowing you to take huge leveraged stakes.

[stompix]

About the charity. The article says that he donated $20Mn and avoided paying capital gain taxes on an investment in Amazon stocks. So can someone explain how does this work? If he donated 20Mn of his own money to the charity and then got a rebate against that, then isn't that how this works everywhere?

He donated stocks if he would have sold those stocks and donated to the charity he would have had to pay capital gains, and he would have got a deduction only on the amount he donated after taxation, but donating the stock directly the value is not affected by capital gains so he gets the full deduction for the entire value of the stocks at current value.
It's so common now nobody really is surprised about those numbers, we've seen hundreds of millions donated this way to charities, 20 million seem like peanuts
How Tech Billionaires Hack Their Taxes With a Philanthropic Loophole

I've said it a lot of times if you allow some exceptions from taxation if you allow deductions if you allow any kind of way so that somebody would pay less you can be sure there will be more billionaires and millionaires exploiting this than the people for who this was meant, and trying to regulate it will just turn it into a whack-a-mole game as it usually does.

[Ryker1]

Well, in my own opinion --good thing about these firms is, they don’t lose numbers, they have unlimited numbers, to be honest.
But perhaps, intel is one of the best skill people should have in order to stay in business. SEC is being strict but these people know how to play the game. I just had this weird imagination that SEC and the organizations do what they do so people who are involved in the process will benefit. Like come on, this is not new. Since day one, these things already happen anywhere on Wall Street. ^{[My two cents]}

[Twentyonepaylots]

Well it's quite good that the management decided not to dabble with cryptocurrencies, because if so we are generally fucked. Although we cannot deny that bitcoin has its ties with the outside market, even at times the Wall Street. So we may have dodged a bullet right now, but we can never tell what's in store for us in the future. The world of stocks and money is a very complex field with things that are more than what meets the eye. It is best if we could gain more info by researching so we can forever ensure the value of our assets. Be it crypto or stock/bonds.

[Lucius]

It's so common now nobody really is surprised about those numbers, we've seen hundreds of millions donated this way to charities, 20 million seem like peanuts
How Tech Billionaires Hack Their Taxes With a Philanthropic Loophole

Great article, so if someone still thinks that the rich donate because they want to help someone, I think they want to help themselves first and that what they do is just a fake charity - apart from what we know, I believe a good portion of donated money never gets where it would need. It is an impressive fact that Americans donated almost $450 billion in 2019, and at the same time 43.5 million of them live in poverty, not to mention the millions who are homeless.

I wonder where all that money from donations goes, who is actually helped by these fake benefactors?