Banks Face Billions in Losses as a Bet on ViacomCBS and Other Stocks Goes Awry

Mr. Hwang had worked under billionaire hedge fund titan Julian Robertson at Tiger Management and made him one of the company’s famous alumni, or “cubs,” when he started his own fund, Tiger Asia. However, in 2012 he faced an inside investigation. Securities regulators said Tiger Asia used confidential information to bet against shares in Chinese stocks and manipulated other stocks.

Mr. Hwang pleaded guilty to remittance fraud on behalf of Tiger Asia, paid millions in fines, while accepting a five-year public money management ban following the settlement with the SEC. He reorganized the company as a family office, meaning it no longer manages external money and has renamed it Archegos Capital Management; Archegos is a Greek word for leader or founding father and is used in the Bible to refer to Jesus.

“It’s not just about money, it’s about the long term,” Hwang said in a 2018 video in which he talked about his beliefs and work. “God certainly has a long-term perspective.”

According to four people familiar with the matter, Mr. Hwang had recently built large holdings in a small number of stocks, including ViacomCBS and Discovery, which also operate the TLC cable channels and the Food Network, as well as Chinese companies RLX Technology and GSX Techedu. Those bets resolved spectacularly in just a few days last week.

Last Monday, shares of RLX Technology, an e-cigarette company, fell sharply after Chinese regulators tabled potential new regulations for the industry. In the US listed RLX securities, so-called American Depositary Receipts, fell 48 percent. The next day, GSX Techedu, a tutoring company that has been a target for short sellers in recent years who claimed the company’s sales were overvalued, fell 12.4 percent.

On Wednesday, ViacomCBS sold a number of shares in the open market to raise money to fund its new streaming business, exacerbating Mr Hwang’s situation. His company began responding to inquiries from concerned banks. Goldman Sachs lenders urged Archegos to cut back on its disclosure, said two people familiar with those conversations. But Archegos pushed back, saying the troubled stocks would rebound, one of the people said.

By Friday morning, when Archegos failed to post an additional “margin”, Morgan Stanley and Credit Suisse, two of Archegos’ main lenders, had declared the fund defaulted, four people said. Your action paved the way for Goldman Sachs and others to do the same. Huge blocks of shares were soon offered.

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