Bill Hwang

It says nothing at all about an investor who arranges, deliberately and repeatedly, to never hold the share who takes every dollar of the gain and every dollar of the loss through a private contract with a bank instead, and who signs that exact same contract with eight or nine banks at once.

This is the GP and LP analysis of Bill Hwang and Archegos Capital Management, the mechanism by which a synthetic derivative built for hedging became the architecture of a criminal fraud, the specific reason spreading the same position across multiple counterparties defeated every one of their individual risk models simultaneously, and what this establishes for anyone extending leverage against a counterparty's own self-reported concentration.

There was a pattern here, a specific mechanical pattern of how an investor can turn the very feature that makes a swap useful synthetic, off-balance sheet, undisclosed into a tool for placing the same concentrated bet nine times over, in nine places that could not see each other.

We are going to dissect it, layer by layer.

However, there could be, uh, many cases in which people take decisions which end up being highly successful, but the decision itself was not, and if you were to repeat the decision, then you will come a cropper.

So Bill Hwang turned $200 million into over 20 billion by doing what every finance textbooks tells you not to do, which is to put all your eggs into one basket and leverage, and he did extremely well with, with Archegos Capital.

So they bet on, uh, Viacom and Discovery and Tencent.

But then-