‘All the makings of a dangerous situation’


'All the makings of a dangerous situation'

Sen. Elizabeth Warren, D-Mass., conducts a news conference in the Capitol, March 1, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Sen. Elizabeth Warren is taking aim at Archegos Capital Management and the lightly regulated hedge-fund industry after their stock trades sent the market into a frenzy late last week.

“Archegos’ meltdown had all the makings of a dangerous situation — largely unregulated hedge fund, opaque derivatives, trading in private dark pools, high leverage, and a trader who wriggled out of the SEC’s enforcement,” Warren told CNBC in a statement Tuesday.

“Regulators need to rely on more than luck to fend off risks to the financial system: we need transparency and strong oversight to ensure that the next hedge fund blowup doesn’t take the economy down with it,” she added.

Warren, who is a member of the powerful Senate banking and finance committees, is one of the first lawmakers to respond to what turned out to be disastrous trades by Archegos, a family office founded by former Tiger Management analyst Bill Hwang.

The fund’s trades sent the stock of ViacomCBS into a tailspin.

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By the time Credit Suisse and Nomura, two prime brokers of Archegos, announced early Monday that they faced losses that could be “highly significant” to the banks, rival firms Goldman Sachs and Morgan Stanley had already finished unloading their positions, according to people with knowledge of the matter. They requested anonymity in order to speak about private negotiations.

Goldman managed to sell most of the stock related to its Archegos margin calls on Friday, helping the firm avoid any losses in the episode, according to one of the people. Morgan Stanley sold $15 billion in shares over a few days, avoiding significant losses, CNBC’s Leslie Picker reported.

— CNBC’s Hugh Son and Leslie Picker contributed to this report.


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