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On the money

A new hedge fund bogeyman

Bill Hwang, right. Emile Wamsteker/Bloomberg/Getty Images

Bill Hwang has replaced Lex Greensill as chief bogeyman of the global markets. After the collapse of the specialist finance firm Greensill Capital earlier this month, last week saw a $20bn-$30bn forced selloff of shares linked to Hwang’s little-known hedge fund, Archegos Capital Management. This prompted The New York Times to ask “why some of the biggest Wall Street banks were willing to do business with someone who, less than a decade ago, was fined and penalised by securities regulators” over alleged illegal trading in Chinese stocks. The turmoil, said the NYT, highlights “yet again” the potential of individual players “to hobble an intricately connected but largely opaque financial system”.

One of the many intriguing aspects of this complex derivatives story is that some banks (primarily Goldman Sachs and Morgan Stanley) moved quickly to unravel their positions and escaped relatively unscathed, while others (notably Credit Suisse and Nomura) appear to have hesitated, chalking up losses that “may add up to about $5bn”, according to Katherine Griffiths in The Times.

Apart from the financial fallout, says Griffiths, the Archegos saga could damage Goldman’s relationships with companies and investors: those directly burnt by the fire sale and “those that may wonder if Goldman would trample on them to protect its own interests in future”.

The FT, meanwhile, has Credit Suisse in its sights. Since chief executive Thomas Gottstein took the reins a year ago, it says, “the bank has lurched from one crisis to another”. It has been caught up in alleged fraud at a Chinese coffee-house chain and the German payments company Wirecard; revealed a potential $680m hit from US mortgage-bond litigation; written down $450m on its investment in hedge fund York Capital; and said its clients could lose up to $3bn from the frozen funds linked to Greensill. It faces criminal charges in Switzerland over alleged dealings with Bulgarian mafiosi engaged in cocaine smuggling: it denies any wrongdoing and has pledged to defend itself “vigorously”. And it is being sued for its purported role and is being sued for its purported role in siphoning off $200m from Mozambique’s taxpayers as part of the “$2bn tuna bond” scandal. Now Credit Suisse does not know how much it will lose because of the Archegos sell-off.

The FT wryly notes that, although Bill Hwang has recently been missing in action, banks might take solace from a 2018 interview in which he declared: “It’s not all about money… God certainly has a long-term view.”

The devil is in the details

A pair of red and black sneakers – allegedly with a drop of blood injected into the sole, a reference to the Bible passage Luke 10:18 stitched on the side and a bronze pentagram on the laces – caused a storm on social media this week and prompted a trademark infringement lawsuit from Nike.

MSCHF Product Studio Inc (pronounced “mischief”) made 666 pairs of these “Satan Shoes”, which quickly sold out at $1,018 apiece, according to The Wall Street Journal. The launch coincided with the release of a single by Lil Nas X in which the rapper appears to be in the Garden of Eden and falls into hell, where he gives the devil a lapdance. It has been viewed more than 43m times on YouTube.

Nike claims the sneakers bear similarities to its Air Max 97 shoe and said this has “caused confusion in the marketplace”, including calls for a boycott of its products. The footwear giant insists it is in no way connected.

MSCHF is a small Brooklyn-based business “known for publicity stunts and viral product marketing”, says the WSJ. Its founder admits it is “an attention and fame machine”. Past projects include a pair of customised Nike sneakers that it called “Jesus Shoes” and said were filled with holy water; decapitated-swan pool floats; and an app for picking stocks based on astrological signs.

India’s new billionaires

India’s rich list now contains 177 billionaires (207 if you count 30 across the diaspora), putting the country in third place behind China (1,000) and the US (700). But what’s interesting about the latest Huran Report, says The Economist, is what it reveals about India’s changing economy.

While the two wealthiest Indian individuals, Mukesh Ambani ($83bn) and Gautam Adani ($32bn), owe their success to petrochemicals, ports and power plants, a growing number of newcomers have built their fortunes on drug-making and technology – companies fuelled by intellectual capital and consumer spending rather than physical assets.

Just 10 names dropped out of this year’s list, but that was enough to inspire a Netflix documentary, Bad Boy Billionaires, about the fraudulent behaviour that led many of them to their downfall. Watch the documentary here.