Archegos blew up $10B at the banks that lent to it — hidden behind total return swaps

Archegos Capital Management was the family office of Bill Hwang, a former hedge-fund manager who had run Tiger Asia Management. By 2020 it managed tens of billions of dollars, and Hwang had built enormous, highly leveraged bets on a handful of stocks — ViacomCBS, Discovery, Baidu, Vipshop and Farfetch among them. Crucially, much of the exposure was held through total return swaps: derivatives where the bank holds the actual shares, so Archegos didn't have to disclose how much it had staked.

The swaps also meant that no single bank could see the whole picture. Archegos did business with several banks at once — Credit Suisse, Nomura, Goldman Sachs, Morgan Stanley and others — each extending huge leverage against the same concentrated positions, largely unaware of how exposed the others were. When the underlying stocks fell in late March 2021, Archegos couldn't meet its margin calls, and on March 26 the banks began frantically selling billions of dollars of shares to protect themselves.

The forced selling drove the stocks into a free fall — ViacomCBS fell about 27% in a day — and the losses landed on the banks. The total damage to lenders was around $10 billion, with Credit Suisse taking the biggest hit at roughly $5.5 billion and Nomura close behind; Goldman Sachs and Morgan Stanley escaped with smaller losses by moving faster. Hwang lost billions personally and was later convicted of fraud and sentenced to 18 years in prison. The collapse was compared to Long-Term Capital Management.