SEC, CFTC and DOJ Charge Archegos and Principals in “Massive Market Manipulation Scheme”

In March 2021, Archegos Capital Management, LP (Archegos), the family office of Sung Kook (Bill) Hwang, collapsed in spectacular fashion, allegedly leaving its counterparties with more than $10 billion in losses. According to recent simultaneous SEC and CFTC enforcement actions, Archegos, Hwang and three employees engaged in a scheme to manipulate the prices of Archegos’ largest securities holdings by taking huge positions using total return security-based swaps with at least ten different counterparties, which had limited or no visibility into whether Archegos was entering into similar swaps with other counterparties. In addition, the SEC and CFTC alleged that, to increase or maintain Archegos’ trading limits with counterparties, or to secure favorable margin terms, the defendants misled the counterparties about both Archegos’ liquidity and the composition of its total portfolio. This article details the SEC and CFTC allegations; the settlements with two of the respondents; and the DOJ’s parallel criminal charges. See “SEC Proposes New Rules for Security-Based Swaps” (Feb. 17, 2022).

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