New details revealing how Archegos Capital Management founder Bill Hwang hid his fund's extreme exposure from its lenders raise fresh questions about the risk management policies at these global banks, former regulators and risk experts said, Reuters reported. Hwang and Archegos Chief Financial Officer Patrick Halligan were arrested Wednesday on charges they lied to banks to increase Archegos' credit lines and used the money to ramp up their exposure to a handful of stocks, which they also manipulated, according to a Justice Department complaint. The pair vigorously deny all the charges. Archegos defaulted in late March 2021 after the value of its trades sank and banks called in their credit lines, leaving global lenders, including Credit Suisse AG, Nomura Holdings, Morgan Stanley and UBS Group AG, with combined losses of around $10 billion. While the Justice Department portrays the banks as victims who were lied to by Archegos executives, the indictment reveals red flags that banks could have acted on to reduce their exposure to Archegos' aggressive trades, risk experts said. These include the fund's unwillingness to provide certain details on its portfolio; its failure to provide evidence to corroborate its claims; the huge spike in some stocks owned by Archegos; and the fund's frequent breach of its credit limits.
