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Reddit’s retail trader netizens gloat over Archegos implosion

Users on the wallstreetbets forum were quick to highlight the irony of hedge funds causing market chaos mere months after accusing retail traders of doing the same during January's GameStop buying frenzy

GameStop Corp - Reddit’s retail trader netizens gloat over Archegos implosion

The implosion of secretive hedge fund Archegos Capital Management is being celebrated by at least one segment of stock market participants, retail traders on the Reddit forum r/wallstreetbets (WSB).

The collapse of the fund, which has seen major financial institutions suffer losses running into the billions and a spike in uncertainty for equity markets, was greeted with mockery by multiple users on the forum, who couldn’t help but notice the irony of the situation arising mere months after they were criticised by financial institutions for causing volatility during the GameStop Corp (NYSE:GME) trading frenzy earlier this year.

READ: Goldman Sachs and other big banks tumble over hedge fund default

“All of 2021 the hedge funds have paid CNBC to blame wsb for market volatility. They said we are dumb apes, that we were stupid and we would crash the market because of our degenerate recklessness, that we don’t know what we’re doing and we will end up in tears”, WSB user Orangie_Goldfish said in a forum post on Tuesday morning.

“What we are seeing now is coming true, except that hedge funds are the ones whose over-leveraged recklessness has caused huge sell offs due to margin calls. What is coming is absolutely poetic…They are the ones who will end up in tears due to their recklessness and greed”, they added.

Another user, The_Greyscale, went so far as to accuse “over-leveraging” hedge funds such as Archegos and Melvin Capital, the short-selling hedge fund that was the original target of the GameStop buying spree, of presenting a national security risk as such behaviours and lack of government oversight could “become a tactic of economic warfare”.

Archegos’ collapse was sparked by the fund defaulting on a margin call following a US$20bn ‘fire sale’ of individual stocks late on Friday which included block trades of ViacomCBS (NASDAQ:VIACA), Discovery (NASDAQ:DISCA), GSX Techedu (NYSE:GSX) and other Chinese tech companies, now thought to have been made by Archegos after it suffered significant losses.

Japanese bank Nomura said it faced a possible US$2bn loss due to transactions with a US client and Credit Suisse said “a significant US-based hedge fund defaulted on margin calls made last week” and this was likely to be “highly significant and material” to its first-quarter results.

Other major banks reported to have been part of the block trades were also caught in the slump, notably Deutsche Bank, UBS, Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS).

Archegos is run by Bill Hwang, the former manager of Tiger Asia, a subsidiary of hugely successful hedge fund Tiger Management which was liquidated during the bursting of the dotcom bubble in 2000.

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