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On account of its spectacular implosion last year, Archegos Capital Management does not have any money to repay its banks the $10 billion or so they lost on said spectacular implosion. What the former family office does have is time, and a willingness to spend that time carefully going through each and every transaction in question in dramatically unflattering detail.

A number of the banks have threatened legal action against Archegos to recoup some of the money they lost on its soured bets last March.

However, Archegos has warned the banks that it would reject their claims, which could result in a lengthy and public legal process, according to one of the people.

Archegos has also said it could mount its own legal claim that the banks behaved unlawfully in their dealings with it, the person said. It would claim that the banks were “negligent” when they allowed the family office to build up vast amounts of leverage and that prime brokers “induced it” into borrowing as much as $50bn of shares, they added./“By the time a judge has [ruled on the matter] it’s five years later and the whole thing has been raked through publicly in the courts,” the person said.

And, crucially, not only the courts in which the banks and Archegos are variously suing each other, but in the courts and regulatory hearing rooms that are taking a very close and skeptical look at block trading in general, and the block trading around Archegos’ collapse in particular. Much better to sweep this all under the carpet then before getting anything put on the record that might perk up the earns of the Justice Department or Securities and Exchange Commission.

“The settlement negotiations basically come down to ‘we have no money but if we find some we will pay you’,” said one of the people involved in the discussions. They added that it was unlikely any of the banks would attempt to force the involuntary bankruptcy of the family office. “There is no point in doing so. Assets are being recovered and contracts unwound and proceeds distributed as appropriate,” the person added.

Certainly, the wisdom of such a path—cutting a deal in the face of a federal fraud investigation—is apparent to Allianz as regards its own massive hedge-fund losses.

A group of investors suing Allianz SE over losses tied to the collapse of its U.S.-based hedge funds asked a judge to dismiss the lawsuit after agreeing to settle with the insurance giant…. Allianz, which owns bond giant Pacific Investment Management Co., had also said the ongoing probes by the U.S. Securities and Exchange Commission and Department of Justice are at a “sensitive” stage and that it couldn’t yet estimate the final price tag to resolve those matters.

Archegos and banks in settlement talks amid block trades probe [FT]
Allianz Settles Suits Over Multibillion-Dollar Fund Blowup [Bloomberg]

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Photo: Getty Images.

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