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Archegos and banks in settlement talks amid block trades probe

Archegos Capital Management and global banks are in negotiations to avoid a lengthy court battle that would reveal details of the deals that led to Dissolution of the family officeAccording to three people who know the subject.

The potential legal battle is centered on billions of billion-dollar swaps agreed between banks like Morgan Stanley and Credit Suisse and the family firm run by former hedge fund manager Bill Hwang, which exploded spectacularly last March.

Negotiations for a ceasefire agreement come as the Financial Watchdogs and the U.S. Department of Justice have expanded a broad examination of alleged irregularities in Wall Street’s profitable practice of marketing large stock blocks.

Authorities are investigating whether banks violated the rules when negotiating ‘block deals’ – a private sale of large amounts of shares to hedge fund clients – including during Archegos’ failure last year.

Morgan Stanley, which was very exposed to Archigos and was among the first to put up for sale large chunks of shares it held on behalf of the investor, revealed last week that the Securities and Exchange Commission Examining the bank’s trading block Business since 2019 and that the Ministry of Justice has recently opened its own investigation.

Six banks that provided services through their brokerage divisions to Archigos – Credit Suisse, Nomura, Morgan Stanley, UBS, MUFG and Mizhoho – lost about $ 10 billion when they liquidated Family Office positions in US-traded companies like ViacomCBS after Archegos failed In doing so, meet marginal conversations.

Morgan Stanley and Goldman Sachs, who was Archagos’ chief broker but said he had not incurred material losses since the collapse, sold about $ 19 billion in big block deals in one day. Banks purchased and held these shares themselves as part of swap transactions they performed for Archegos.

Some banks have threatened a lawsuit against Archegos to get back some of the money they lost in his sour gamble last March.

However, Archegos has warned banks that it will reject their claims, which could result in a lengthy and public legal process, according to one person.

Archagos also said she could raise her own legal claim that the banks had acted unlawfully in their dealings with her, the man said. She would argue that the banks were “negligent” in allowing the family firm to build huge amounts of leverage and that chief brokers “caused him” to lend up to $ 50 billion in shares, they added.

“Until a judge has [ruled on the matter] “It’s five years later and the whole thing is publicly closed in the courts,” the man said.

The delicate situation has led to negotiations to resolve the proposed claims out of court. The hearings are approaching a crucial moment as a restraining order that prevents Archagos’ creditors from forcing her into bankruptcy to try to back up what they deserve will expire at the end of March.

“Negotiating the settlement basically comes down to ‘we have no money but if we find out how much we will pay you,'” said one of those involved in the discussions. They added that it was unlikely that any of the banks would try to force an involuntary bankruptcy of the family ministry. “There is no point in doing so. The assets are returned and contracts are broken down and the consideration is divided accordingly,” the person added.

But a second person close to the matter said that “there is simply not enough money to cover the shortfalls of the banks” and added that they believe there is only a “50/50 chance” that negotiations for a settlement will succeed.

A man close to Archegos said he had not been approached by authorities investigating the banks’ blocking deals. The Justice Department is separately examining the collapse of the family ministry, and the Securities and Exchange Commission opened a preliminary investigation into Wang last March.

Morgan Stanley, Nomura, UBS, Credit Suisse, MUFG, Mizuho and Archagos declined to comment.

Archegos and banks in settlement talks amid block trades probe Source link Archegos and banks in settlement talks amid block trades probe

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