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What happened in the last 72 hours of Archegos Capital's trading activity according to Bloomberg?

Archegos Capital Management, a family office run by Bill Hwang, lost approximately $36 billion in a matter of days, primarily due to its high-risk investment strategies, particularly with stocks leveraged with borrowed money.

In the final 72 hours, Archegos's mark-to-market losses from its biggest positions, including ViacomCBS and Discovery, caused banks to scramble to assess their exposure to the collapsing fund.

Hwang’s strategy involved substantial leverage, with reports indicating that he was using up to 5 times the capital he had on hand, which heightened the risk of significant losses when stock prices began to drop.

The firm’s rapid descent began with an accidental $470 million margin call that alarmed banks and triggered a domino effect of selling pressure in the underlying stocks.

A significant moment captured during this timeframe was a frantic communication where staffers relayed the urgency of liquidating positions quickly to limit losses to the banks.

The trial surrounding Hwang revealed that multiple banks had lent money against these positions without fully understanding the extent of Hwang’s leveraged bets or the mechanisms of risk management employed.

As the crisis developed, analysts pointed out that Archegos lacked basic structures for oversight, which is common in regulated hedge funds, making it unique for a family office of its size.

Hwang had engaged in “total return swaps,” a derivative that allowed him to gain large exposure to stocks without actually owning them, complicating efforts to track his true exposure in the market.

Bloomberg reported that at one point, Hwang’s staff was on a call with banks while going through airport security, exemplifying the chaotic state of communication and panic leading to the firm's downfall.

Documents presented in court discussed how Hwang communicated a quick liquidation plan, asserting that half of his book could be liquidated in just ten days, which proved overly optimistic in the face of market panic.

During the last 72 hours, communication failures between Hwang and the banks meant information was not shared transparently, leading to miscalculations in managing risk and exposure to Archegos's positions.

Hwang’s history of market strategies, including previous successes and failures, highlighted the psychological factors influencing his risky behavior and management decisions leading up to the crisis.

Significant financial repercussions were felt across major banks that were exposed to Archegos, with Credit Suisse and Nomura reporting hundreds of millions in losses, prompting questions about their risk assessment protocols.

As markets panicked, various executives across firms engaged in crisis meetings discussing how to mitigate losses and address the spiraling situation surrounding Archegos.

Reports estimate the total loss caused by Archegos in terms of market value exceeded $20 billion across the broader market as other investors panicked and sold their positions.

This scenario shed light on the critical role of regulatory oversight and the balance between aggressive risk-taking and responsible capital management within family offices and hedge funds.

The complex web of financial instruments involving derivatives, margin calls, and various asset classes illustrated the intricate and sometimes opaque nature of modern finance that can lead to swift financial crises.

The saga of Archegos Capital concludes as a cautionary tale of how amplifying investment risks through leverage without adequate safeguards can lead to rapid and catastrophic loss, reminding the financial community about the importance of transparency and responsibility in trading practices.

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