A former employee of Archegos, the investment firm that caused a brief market panic last year when it lost more than $10 billion in just days, is suing the company and its founder, Bill Hwang, plus five former top executives. The lawsuit was filed Tuesday in the Federal District Court in Manhattan, the DealBook newsletter reports.
Brendan Sullivan, a technical stock analyst who joined Archegos in 2014 and resigned shortly after the blast, said he lost $50 million, which was part of a $500 million deferred compensation plan that evaporated along with Archegos’ other assets. when his highly leveraged options strategy failed.
The lawsuit is intended to force Mr. Hwang and others to cover the losses. Mr. Hwang was charged this year by federal prosecutors with fraud on suspicion of deceptive lenders and market manipulation, and pleaded not guilty to the lawsuit. Last week, Archegos lawyers filed motions to dismiss other lawsuits against the company from the Commodity Futures Trading Commission and the Securities and Exchange Commission.
Employees of the fund were told that the deferred payment plan was guaranteed, the suit says, and that it was invested in highly liquid stocks. Neither claim was true, according to the lawsuit. In addition, employees were forced to contribute at least 25 percent of their annual bonus to the plan and state how much they would defer before knowing the details of the bonus.
“The message was crystal clear,” says the suit. “No contribution. No bonus.”
Brown Rudnick’s Michael Bowe, Mr. Sullivan’s attorney, told DealBook that “Hwang and these executives lied to their employees the way they lied to the banks.” A lawyer for Mr Hwang declined to comment. An Archegos spokesperson did not respond to a request for comment.
The fund tried to dissuade employees from quitting, and questioned deferred compensation payments if they did, the suit says. Mr. Sullivan, who left anyway, has not received any money from the plan, although the company continued to promise former employees that they would receive payments as late as January, according to a letter Archegos saw by DealBook to former employees.
Archegos was run as a “cult,” the suit says. Interviews “revolved around religion and an investigation into the candidate’s religious upbringing,” the lawsuit said. During performance reviews, Mr Hwang, who is a Christian, told employees to “spend more time on their faith”. At corporate retreats, according to the lawsuit, employees were credited for publicly expressing their gratitude for “God, Hwang and Archegos.”
