Archegos Capital Lawsuit Against Goldman Sachs & Morgan Stanley Dismissed

Several lawsuits filed by investors against Goldman Sachs Group Inc. and Morgan Stanley have been dismissed by a US judge.

The investors accused the banks of misconduct that contributed to the swift collapse of Bill Hwang's $36 billion firm, Archegos Capital Management, in March 2021.

The US District Judge Jed Rakoff in Manhattan dismissed the investors' claims of market manipulation and insider trading with prejudice, stating that they cannot be refiled. The lawsuits were previously dismissed by a different judge but were allowed to be brought again against Goldman and Morgan Stanley.

Hwang's utilisation of financial instruments triggered Archegos' downfall called total return swaps to amass significant stakes in companies such as ViacomCBS, Discovery, and Baidu. This approach led to an estimated $160 billion exposure in stocks.

The investors alleged that Goldman and Morgan Stanley were aware of Hwang's need to sell stocks to meet margin calls, yet still sold them, resulting in substantial losses for the investors while the banks avoided significant losses.

Judge Rakoff did not provide an explanation for his decision in a brief order, stating that an opinion would follow later. Representatives for the investors, Goldman Sachs and Morgan Stanley did not immediately comment on the dismissal.

The collapse of Archegos caused substantial losses for various banks, including Credit Suisse and Nomura Holdings. Hwang and former Archegos CFO Patrick Halligan are scheduled to face trial on May 8 in Manhattan on charges related to the collapse, including securities fraud and weaving conspiracy. Both have pleaded not guilty to the charges.

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