Reported by Peter Jeffrey Legal Editor

Here are the key takeaways from Tuesday’s testimony of former Archegos risk management chief Scott Becker. He’s one of the prosecution’s star witnesses against Hwang and Halligan and is expected to be on the stand for the rest of the week.

• Archegos’ efforts to spin its increasingly calamitous situation to the banks as manageable continued almost all the way up to its collapse, according to Becker’s testimony. The firm had about $1.7 billion in excess cash on the night of March 24, 2021, and expected margin calls the next day of $13 billion beyond that, Becker told the jury. He then described an internal Zoom call with Hwang, CFO Halligan, head trader Tomita and executive chairman Andy Mills on how to deal with the crisis. Halligan said they should follow a model set years earlier at Tiger Asia, Hwang’s previous fund, Becker testified. That involved reaching out proactively to counterparties and offering general reassurances that the firm would sell securities to raise cash. The CFO said to stress that Archegos was facing a liquidity issue, not a solvency one.

• The big banks took different tones with Archegos as the crisis unfolded. Individual calls to the banks began at 7:30 p.m. that night with Credit Suisse, Archegos’ largest counterparty. Taking the lead, Mills said Archegos wouldn’t be able to meet margin calls by the next day but that most would be met by liquidations, Becker testified. He told the jury that CS took “a very soft tone,” while Morgan Stanley was “very harsh, angry.” Becker said Archegos paid a $980 million margin call to Morgan Stanley the same day using excess cash it was getting back from banks to meet some of its calls. As for Credit Suisse, it didn’t survive the Archegos implosion.

• Goldman Sachs’ call with Archegos reflected the family office’s duplicity even at the very end, according to Becker’s testimony. Goldman asked for the firm’s current capital. Halligan told Becker to say about $20 billion. The real figure was around $17 billion, Becker testified. He said he was communicating with Halligan during many of the bank calls and asked the CFO what Archegos’ excess cash was. The answer, Becker told the jury: “Zero” dollars. 

• The fateful March 24, 2021, Zoom call was preceded by a Zoom the evening before, Becker testified. On that call, Halligan told Becker to continue the “project” he was working on over the weekend at Hwang’s behest — identifying possible holdings to liquidate and how much cash each would free up. An updated report was prepared that night, Becker told the jury. Asked if Archegos had made the sales identified in the report to generate the cash it desperately needed, he answered simply, “No, it did not.” That outcome would mark the end of Archegos.

Read full report: https://www.bloomberg.com/news/live-blog/2024-05-21/archegos-trial-may-21