Reported by Chris Dolmetsch and Bob Van Voris

Newly promoted to equities Delta One head at Credit Suisse Group AG in February 2021, Josh Lukeman said he only became familiar with Archegos Capital Management that month.

Six weeks later, on March 26, 2021, he got a 7:50 a.m. text message asking him to jump on a call. The subject was Archegos, which was defaulting on billions of dollars of Credit Suisse margin calls. Before he knew it, he was on a Citibike heading into the office.

“I was told that I was going to be the one to trade out of this risk,” Lukeman testified Tuesday in the fraud trial of Archegos founder Bill Hwang and the firm’s former chief financial officer, Patrick Halligan.

Lukeman was the the first trial witness to describe the Archegos debacle from inside Credit Suisse, which was the largest counterparty to Hwang’s family office. The $5.5 billion the Swiss bank lost accounted for most of the losses among Archegos’ trading partners and was a major factor in its own collapse last year. 

Moving Slow

As Delta One head, Lukeman oversaw products with one-for-one tracking of other securities. This includes equity swaps like the ones Archegos traded. He testified that Credit Suisse hedged Archegos’ swaps on such a one-to-one basis.

“We’re not in the business of blindly taking on” balance-sheet risk or single-stock swap risk, Lukeman said. “Otherwise we would have wild swings every night.”

That’s a key part of the prosecution’s case against Hwang. They claim he knew he could manipulate the market because he could count on the banks buying the stocks underlying his swap orders on a one-to-one basis. The defense has said that wasn’t always true.

Read full report: https://www.bloomberg.com/news/articles/2024-05-28/credit-suisse-s-archegos-debacle-takes-hwang-trial-spotlight