The Department of Justice has opened a probe into Archegos Capital Management, whose collapse in March sent shockwaves through the market and left major banks with more than $10bn in losses.
The department has requested information from a number of banks who acted as the family office’s main trading counterparties, according to two people briefed on the matter. It was not clear what information prosecutors were seeking or whether the department would pursue criminal charges.
The DoJ declined to comment. Archegos did not immediately respond to a request for comment.
Archegos, run by the former hedge fund manager Bill Hwang, made highly leveraged bets on a small number of share prices, using derivatives called total return swaps. It was forced to unwind the trades in March after share prices turned against it, prompting margin calls from its prime brokers that it failed to meet.
The firm’s prime brokers dumped more than $25bn worth of stock during the unwinding. Banks including Nomura, Credit Suisse and Morgan Stanley racked up losses of more than $10bn.
The Archegos fallout has raised questions about how family offices are regulated. It has also turned the spotlight on prime brokers who were willing to build relationships with Hwang even though he was under a trading ban in Hong Kong and had previously reached a large settlement with US regulators to resolve insider trading charges.
The Securities and Exchange Commission and the chair of the US Senate banking committee have also requested information surrounding Archegos’ collapse.
Bloomberg earlier reported on the DoJ investigation.