The US investigation into the Archego Capital Management explosion of Bill Hwang is asking whether the company has manipulated the market.
The Securities and Exchange Commission (SEC) is reviewing the company's trading activities, including whether it conceals the size of its bets on some listed companies, according to people familiar with the matter. Authorities are assessing whether Archegos bought shares in the same company in several banks to avoid triggering disclosure rules. Overall, Hwang has a large position.
The fact that the SEC is usually a preliminary step in launching an investigation does not mean that Hwang, which has not yet been charged with misconduct, will face enforcement action. Representatives of Hwang and SEC declined to comment.
Archegos borrows money to take centralized stakes in some listed companies, totaling more than $100 billion. As some of its holdings plummeted, it burst in March, triggering margin calls from banks. The bank then forcibly liquidated Hwang's position.
Including Credit Suisse Group and Nomura HoldingsAnd Morgan StanleyLenders lost more than $10 billion, triggering internal investigations and executives being forced to leave. At the same time, regulators are discussing whether to change rules that exempt family offices such as Hwang from stricter regulation.
Gary Gensler5, chairman of SEC, told Congress this month that stricter disclosure regulations for investment companies may be needed in the wake of the Archego breach. He later said he planned to publicly disclose more industry data.
The US Department of Justice has also launched an investigation into the explosion of the company. But this is not the first time Hwang has been the subject of a market manipulation investigation.