In suburban Tenafly, 20 miles from midtown Manhattan, there is Bill Hwang, who just lost more than US$25 billion.
A couple of months after Archegos shook global finance, federal authorities and bankers are still trying to figure out what happened.
The Financial Times reported that employees of Archegos Capital Management lost a total of half a billion dollars after the investment fund’s collapse shortened the value of their bonuses.
Archegos imploded in March this year while several former portfolio managers’ leveraged bets began to fail and his lenders started to sell investments.
The report said that the company set up a partial payment.
This payment plan was worth about $50 million. However, its value varied depending on the performance of the company’s leading investment fund.
Now, some people believe he can bankroll hedge funds and rise from the ashes.
US prosecutors have questions: Was it another display of Wall Street greed, or even worse? Credit Suisse Group AG says Hwang’s family office burned it.
Hwang accumulated one of the world’s tremendous wealth in virtual isolation but then lost it in a blink.
Several sources told the FT that before Archegos fell into trouble, the value of the bonuses reached around $500 million.
According to a document, the payment plan terms say that the company might increase or decrease the payment amount by some percentage. It would be equal to the fund’s invested increased or decreased capital in value.
The members saw more than 26% of their bonus kept aside under this plan, paid out on departure from Archegos. However, the document said the bonus could not drop below its original value.
Still, some former employees wait to receive their bonus payments. The FT told sources that the money was gone.
Hwang was considered a successful manager until he faced insider trading charges. He converted his hedge fund into a family office, managing his wealth that required less regulatory disclosures.
This account also suggests a shift in Hwang’s strategy that confused outsiders. Archegos grew by making enormous bets on FAANG stocks that represents blue-chip US technology firms. However, last year, it turned money into risky bets like some US-listed Chinese stocks.
When the banks started dropping Hwang’s portfolio, his shares dropped as well. Besides, a recent crackdown of the Chinese government had further effects on many of Hwang’s bets.
For Hwang’s office, now comes the liquidation. Several months ago, it flourished holdings valued at over US$120 billion, but today, everything is upside down.
David Pauker is the person handling the liquidation, a specialist who stepped in after the failure of Lehman during the 2008 financial crisis. In recent years, Pauker started restructuring the South African furniture retailer Steinhoff International Holdings, which nearly failed in 2017. However, he refused to comment on these matters.
Now, banks are dealing with Hwang’s team to calculate the size of his surviving wealth. They are trying to see if they can recover any of it. Credit Suisse said it would try to recover money from Archegos and its associated entities and individuals.
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