Bill Hwang is the man behind Archegos Capital Management. YouTubeThe FT reported Wednesday that Bill Hwang's Archegos owes $500 Million in deferred bonuses to employees.Archegos employees will receive a portion of their annual bonuses under a payment plan once they leave the investment funds.According to sources, the FT was told by people that "the money" is gone and there's no pot of gold to pay them.Subscribe to our daily newsletter 10 Things Before The Opening Bell.Archegos Capital Management employees could lose as much as half a billion dollars as a result of the collapse of the investment fund, according to the Financial Times on Wednesday.Archegos, Bill Hwang's family office, collapsed in March after some of the portfolio managers at Tiger Capital Management started to lose their leverage and some of his loans were sold.According to the report, the company had established a deferred payments plan that held back a significant portion of its annual bonuses, with a guarantee that they would be paid once a staff member left.The original payment plan, after employee contributions, was worth less than $50 million. According to the FT, however, its value fluctuated according to the performance of the main investment fund.Two sources tell the FT that the value of deferred bonuses soared to $500 million just before Archegos went bankrupt. Due to its collapse, the fund owes money even to former employees.According to a document obtained by the FT, the terms of the payment plan say that "The company will increase/decrease the amount of deferred payments by the percentage that fund's invested capital increased or decreased in values."Participants saw 25% of their end year bonus set aside by the plan. This was to be paid out when they leave Archegos. According to the document, the bonus would not be reduced from its original value.Some ex-employees have yet to receive deferred bonuses payments. According to the FT, sources have stated that "the money has disappeared" and "no pot or gold is available to pay them."Hwang was a successful hedge fund manager who was later charged with insider trading. Hwang transformed his hedge fund which was managed for others into a family office that managed his wealth. This meant that regulatory disclosures were not required.Archegos used large amounts of leverage (or borrowed money) to finance its investments in pursuit of higher returns. This strategy was used to purchase stock worth billions of dollars, but it suffered large losses as the shares fell.When the lenders demanded more collateral, the fund refused to comply. The banks began selling its assets. Archegos' stock price fell further as a result.The losses for banks that didn't immediately sell the shares, including Credit Suisse and Morgan Stanley, was more than $10 billion. The financial system's fragility was exposed by the implosion, which caused widespread chaos on Wall Street.Archegos has retained restructuring advisors to assist it in its financial difficulties and potential legal claims from banks.Read more: A US portfolio manager for a $49B investment firm shares 5 foreign stocks that offer incredible upside. He also explains how investors can use emerging market companies to offset losses in developed markets.
