tl;dr
Morgan Stanley, Goldman Sachs, and Wells Fargo have agreed to pay $120 million to settle a lawsuit linked to the collapse of Archegos Capital Management. The lawsuit claims the banks hid conflicts of interest while selling ViacomCBS shares, contributing to Archegos's downfall. Archegos, which manage...
Three leading US banks—Morgan Stanley, Goldman Sachs, and Wells Fargo—have agreed to pay a combined settlement of $120 million to resolve a lawsuit connected to the downfall of Archegos Capital Management, a multi-billion-dollar investment firm. The lawsuit alleges that these banks concealed conflicts of interest while selling ViacomCBS shares, which played a role in triggering the collapse of Archegos.
Archegos Capital Management, once managing assets totaling $36 billion, suffered a dramatic collapse in March 2021, primarily due to leveraged investment losses tied to ViacomCBS and other companies. With approximately $20 billion of exposure in ViacomCBS alone, the family office's risky bets unraveled, causing significant market repercussions.
The banks in question had dual roles: they assisted Archegos in executing large stock bets while also acting as underwriters for ViacomCBS in a secondary offering. Former ViacomCBS shareholders, including institutional investors like the Camelot Event Driven Fund and the Municipal Police Employees’ Retirement System of Baton Rouge, Louisiana, alleged that the banks concealed their association with Archegos and sold shares to shield themselves from losses.
The settlement awaits approval from a New York state court judge. Notably, Morgan Stanley, Goldman Sachs, and Wells Fargo have denied any wrongdoing despite agreeing to settle. Meanwhile, Bill Hwang, founder of Archegos, and the firm's former CFO, Patrick Halligan, were convicted of fraud related to the collapse in 2024, receiving prison sentences of 18 and 8 years respectively. Both defendants remain out on bail and are appealing their convictions.