Archegos Sent Goldman $470 Million in Error During Collapse

(Bloomberg) -- Goldman Sachs Group Inc. was handed an unexpected $470 million gift from Archegos Capital Management right in the middle of the blowup that wiped out Bill Hwang’s family office.

As Archegos positions cratered in March 2021, it began trying to pull excess cash from trading accounts across Wall Street. It set its eyes on about $470 million at Goldman.

But instead of withdrawing the money, an Archegos staffer accidentally wired that amount to Goldman, and the bank didn’t immediately give it back. That left Hwang’s family office down nearly $1 billion as it was scrambling to prop up its positions and deal with the massive margin calls that would obliterate it out days later. 

The previously undisclosed episode emerged during Hwang’s trial on fraud and market manipulation charges stemming from his firm’s collapse, which ultimately cost his counterparties $10 billion. 

Former Archegos risk management chief Scott Becker, one of the prosecution’s star witnesses, described the mistaken wire on the stand under cross-examination by Hwang’s lawyer, Barry Berke.

“It was a very chaotic day,” Berke said while questioning Becker.

Becker testified that the Goldman wire was sent by Archegos operations team member Barima Osei on March 24, 2021.

“Archegos had approximately a billion dollars less in its operating account at Bank of America because of this error,” Becker testified. 

At the time Archegos was drawing excess funds from any counterparties it could. Jefferies Financial Group managing director Jennifer Miranda testified last week that the scramble prompted her to call Becker.

“What’s the emergency? Why?” Miranda said she wondered at the time. She said she let Archegos withdraw $240 million after Becker reassured her Archegos had ample cash. 

Becker has been testifying that he was directed to lie to banks to increase trading capacity and then to buy time on the inevitable margin calls. He said on the stand that Archegos was expecting $13 billion in margin calls on March 25, 2021. It’s unclear if Goldman was included in that estimate.

Goldman was one of the banks able to offload its Archegos holdings relatively quickly, allowing it to emerge unscathed from the debacle. Archegos’ largest counterparty was Credit Suisse Group AG, and its $5.5 billion in losses trading with Hwang contributed to its collapse last year. 

--With assistance from Katherine Burton.

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