Shortly after the Securities and Exchange Commission (SEC) announced its action against Archegos Capital Management, LP and its leadership team, the regulator has marked some progress in settling the case with one of the defendants. This becomes clear from a document filed by the regulator on May 4, 2022 in the New York Southern District Court.

The document, seen by FX News Group, request the Court’s approval of a partial consent judgment jointly proposed by the SEC and Scott Becker, one of five Defendants in this action.

The Commission and Becker have reached a partial settlement that would resolve certain of the non-monetary relief that the SEC seeks in this case against Becker but leave open for later resolution by motion (or further settlement) the monetary relief sought and the imposition of an officer-and-director bar.

The proposed consent judgment is fair and reasonable and does not disserve the public interest. Among other things, the judgment would permanently enjoin Becker from committing violations of the federal securities laws that the SEC charges him with in this case.

Becker entered a guilty plea in a related criminal proceeding and a control date for sentencing has been set for October 21, 2022. The SEC anticipates that the parties will attempt to negotiate a resolution of the unresolved relief the SEC seeks after Becker’s sentencing.

Becker served as Chief Risk Officer of Archegos.

The SEC has charged Sung Kook (Bill) Hwang, the owner of family office Archegos Capital Management, LP, with orchestrating a fraudulent scheme that resulted in billions of dollars in losses. The SEC also charged Archegos’s Chief Financial Officer, Patrick Halligan; head trader, William Tomita; and Chief Risk Officer, Scott Becker for their roles in the fraudulent scheme.

The SEC’s complaint alleges that, from at least March 2020 to March 2021, Hwang purchased on margin billions of dollars of total return swaps. These security-based swaps allow investors to take on huge positions in equity securities of companies by posting limited funds up front. As alleged, Hwang frequently entered into certain of these swaps without any economic purpose other than to artificially and dramatically drive up the prices of the various companies’ securities, which induced other investors to purchase those securities at inflated prices.

As a result of Hwang’s trading, Archegos allegedly underwent a period of rapid growth, increasing in value from approximately $1.5 billion with $10 billion in exposure in March 2020 to a value of more than $36 billion with $160 billion in exposure at its peak in March 2021.

The complaint also alleges that, as part of the scheme, Archegos repeatedly and deliberately misled many of Archegos’s counterparties about Archegos’s exposure, concentration and liquidity, in order to get increased trading capacity so that Archegos could continue buying swaps in its most concentrated positions, thereby driving up the price of those stocks.

Ultimately in March 2021, price declines in Archegos’s most concentrated positions allegedly triggered significant margin calls that Archegos was unable to meet, and Archegos’s subsequent default and collapse resulted in billions of dollars in credit losses among Archegos’s counterparties.

The SEC’s complaint charges Hwang and the other defendants with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC also seeks to bar individual defendants from serving as a public company officer and director.