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Case against Archegos founder shines light on bank risk controls

Sophisticated Wall Street trading desks face new questions after alleged fraud caused $10bn in losses

Bill Hwang secured billions in dollars in financing from leading Wall Street banks with lies that ranged from assurances he could quickly exit his positions to claims he had large holdings of easily traded stocks like Apple and Google, according to US authorities.

The banks apparently took Hwang’s words at face value as they entered into leveraged derivatives trades with Hwang’s family office, Archegos Capital Management. These deals enabled him to hide the size of his enormous positions in a half dozen US stocks from the broader market and the banks themselves before the scheme collapsed in March 2021.

Following Hwang’s arrest on Wednesday on federal racketeering, fraud and market manipulation charges, Wall Street faced renewed questions about how sophisticated trading desks and compliance departments fell for his misrepresentations — and lost more than $10bn in the process.

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