Wells Fargo, Goldman Sachs, Morgan Stanley Pay $120 Million to Settle Archegos Lawsuit

Three prominent U.S. banks—Wells Fargo, Goldman Sachs, and Morgan Stanley—have agreed to pay a combined $120 million to settle a lawsuit related to the collapse of Archegos Capital Management, a multi-billion-dollar investment firm. The lawsuit, filed by former shareholders of ViacomCBS, now known as Paramount Global, alleges that the banks hid conflicts of interest when selling ViacomCBS shares, which contributed to Archegos' downfall.

Archegos, a family office that once managed $36 billion, collapsed in March 2021 when leveraged investment bets in ViacomCBS and other firms fell through. The firm had about $20 billion of ViacomCBS exposure. The three banks helped Archegos place massive bets on ViacomCBS and other stocks while also acting as underwriters for ViacomCBS in a secondary offering. Investors, led by the Camelot Event Driven Fund and the Municipal Police Employees’ Retirement System of Baton Rouge, Louisiana, accused the banks of hiding their roles with Archegos and selling off their shares to avoid losses.

The settlement, pending approval by a judge in New York state court, is a significant development in the legal battles surrounding Archegos' collapse. The banks have denied wrongdoing in agreeing to settle the lawsuit. The collapse of Archegos has raised broader questions about regulatory oversight and the responsibilities of major banks in ensuring market stability and integrity. The settlement may serve as a cautionary tale for other financial institutions, emphasizing the importance of due diligence and ethical conduct.

The outcome of this settlement and ongoing legal battles will shape the future of the financial industry. The $120 million settlement represents a step towards resolving the legal disputes and providing some measure of compensation to those affected by Archegos' downfall. However, it is a fraction of the billions of dollars in losses incurred by investors, highlighting the ongoing challenges in fully compensating those affected.

Bill Hwang, the founder of Archegos, and former Archegos chief financial officer Patrick Halligan were convicted of fraud in 2024 over the firm’s collapse. Hwang was sentenced to 18 years in prison and Halligan to eight years. Both are appealing while out on bail. The legal battles surrounding Archegos' collapse continue to unfold, with other lawsuits and regulatory investigations ongoing. The settlement is expected to have a ripple effect on the financial industry, influencing how banks and investment firms operate in the future.