Swiss investment bank Credit Suisse has calculated the losses from the actions of the trader Bill Hwan, nicknamed “Wall Street tiger”, and the hedge fund Archegos, according to a statement from the financial operation.
Credit Suisse lost 4.4 billion Swiss francs ($ 4.7 billion) in the first quarter of 2021. Most of this was the result of the actions of Khvan, whose fund actively cooperated with the investment bank.
As a result, Credit Suisse is unable to pay dividends to shareholders, suspends its share repurchase program (considered an alternative to dividends) and lays off two senior executives responsible for the failure.
The Archegos Capital Management hedge fund was founded by trader and professional asset manager Bill Hwan, nicknamed the “Wall Street tiger” because of the early management of the Tiger Asia fund.
Archegos’ strategy was based on the market of total revenue-derivatives exchanges issued by major banks and investment companies. Their significance lies in the fact that the buyer pays a regular premium for the right to receive and dispose of the proceeds from the possession of the underlying assets – common means of exchange. If the underlying assets become cheaper, the exchange holder pays part of the difference to the issuer.
Archegos bought exchanges whose core assets were several times higher than their equity. After a sharp drop in their prices, the fund was unable to meet its obligations to exchange issuers and was forced to sell its underlying assets, causing the US stock market to collapse.
The investigation into Archegos’s activities, which has affected not only Credit Suisse but also other major exchange-issuing banks, has already been undertaken by the US Securities and Exchange Commission (SEC).