Insider Trading Is Not About Fairness
Archegos, funding agreements, private asset alliances and Musk monetization.
The basic story of Archegos Capital Management is that it borrowed billions of dollars from banks to buy huge positions in like seven stocks, pushing up the prices of those stocks and creating huge paper gains for Archegos, which it then used to borrow more money to buy more of the stocks, pushing up the prices some more, etc. This was nice while it lasted, but it couldn’t last. Eventually, in March 2021, one of the stocks went down a bit, the banks sent Archegos some margin calls, it had no extra money, the banks foreclosed, the stocks went down and the whole thing collapsed. Archegos went to zero, its founder got 18 years in prison, and some of the banks lost billions of dollars.
Not all of them. At some point, the banks all discovered that Archegos (1) owned huge levered positions in like seven stocks (with exposure to “anywhere from 30-70%” of each stock), (2) had borrowed from multiple banks to buy those positions and (3) was in the process of collapsing. They arguably did not know any of those things until the collapse was well underway. But there was a brief window of time in which: