NEW YORK, March 31 (Reuters) – A U.S. decide on Friday dismissed seven lawsuits by buyers who accused Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) of market manipulation and insider buying and selling earlier than the collapse of Invoice Hwang’s $36 billion Archegos Capital Administration LP.
U.S. District Choose Paul Crotty in Manhattan rejected claims that the Wall Road banks, two of Archegos’ prime brokers, needs to be accountable for dumping shares they knew Archegos can be compelled to promote after failing to satisfy margin calls in March 2021.
Buyers who purchased the shares, which included ViacomCBS, Discovery and Baidu , mentioned the mixed promoting left them with big losses, whereas enabling Goldman and Morgan Stanley to keep away from billions of {dollars} of their very own losses.
Crotty, nonetheless, mentioned the buyers didn’t adequately allege that the banks breached any obligation towards or hid their promoting from Archegos.
He additionally discovered no proof that Goldman and Morgan Stanley breached any obligation to shareholders of the seven firms by advantage of getting traded after Archegos gave them materials nonpublic details about its monetary misery.
Legal professionals main a committee representing the buyers didn’t instantly reply to requests for remark. Crotty gave the buyers an opportunity to amend their criticism.
Archegos’ collapse stemmed from its founder Hwang’s aggressive use of whole return swaps, a kind of monetary contract, to spice up the efficient dimension of his market positions.
The New York-based agency’s demise brought on billions of {dollars} in losses for banks reminiscent of Credit score Suisse Group AG (CSGN.S), which agreed on March 19 to be acquired by Swiss rival UBS AG (UBSG.S), and Nomura Holdings Inc (8604.T).
U.S. prosecutors filed felony fraud fees towards Hwang in April 2022 for being the alleged mastermind of an unlimited market manipulation scheme at Archegos.
Hwang has pleaded not responsible. On March 23, one other decide refused to dismiss the indictment, which Hwang mentioned prosecutors obtained by tricking him into cooperating with their probe and divulging his protection technique.
The investor lawsuits within the U.S. District Court docket, Southern District of New York are Tan v. Goldman Sachs Group Inc et al, No. 21-08413; Florio v. Goldman Sachs Group Inc et al, No. 21-08618; Merson v. Goldman Sachs Group Inc et al, No. 21-08752; Ulanch v. Goldman Sachs Group Inc et al, No. 21-08897; Felix v. Goldman Sachs Group Inc et al, No. 21-10286; Scully v. Goldman Sachs Group Inc et al, No. 21-10791, and Lee v. Goldman Sachs Group Inc et al, No. 22-00169.
Reporting by Jonathan Stempel in New York; modifying by Jonathan Oatis and Richard Chang
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