Global banks may lose out on more than $6 billion as Archegos Capital Management run by former Tiger Asia hedge fund manager Bill Hwang triggered a fire sale of stocks, unnamed sources familiar with trades of the US investment firm told Reuters. This includes Goldman Sachs, Morgan Stanley, Deutsche Bank, Credit Suisse, and Nomura, who are Archegos’ prime brokers. Prime brokers lend money as well as structure and process trades for a hedge fund.
“This is a challenging time for the family office of Archegos Capital Management, our partners, and employees. All plans are being discussed as Mr.Hwang and the team determines the best path forward,” company spokesperson Karen Kessler said in a statement. Archegos was unable to meet banks’ calls for more collateral to secure equity swap trades they had partly financed. After those positions fell sharply in value, lenders sold big blocks of securities to recoup what they were owed, the sources said.

The problems started last week when a disappointing stock sale by media giant ViacomCBS triggered devastating bank margin calls for Archegos, three sources familiar with the matter said on Monday. Shares in ViacomCBS fell 23% last Wednesday after the media company sold shares at a price that diluted its value. While stocks typically decline after share sales, ViacomCBS was also hurt by analyst downgrades concerned its stock had become over-valued. ViacomCBS’s shares extended their declines on Thursday to be down 30% from the previous Monday’s close, setting off alarm bells at Archegos’ prime brokers and prompting them to offload stock in all of Archegos’ investments.