(Reuters) – Goldman Sachs Group Inc. and Morgan Stanley urged a federal judge to dismiss seven investor lawsuits accusing the Wall Street banks of insider trading ahead of the $36 billion collapse of Archegos Capital Management LP in March 2021.
The proposed class-action lawsuits say Goldman and Morgan Stanley violated securities laws — and avoided billions of dollars of their own losses — by selling to “unsuspecting and unwitting investors” the shares of companies they knew Archegos would sell after failing to meet margin requirements.
But the banks said they were contractually entitled after Archegos failed to close swap deals with the private equity firm, unwind related hedges and sell the underlying shares, among them ViacomCBS, Discovery and Baidu.
“Defendants did not owe Archegos — or anyone else — a duty not to sell stock following Archego̵7;s default,” the banks said in a filing Friday night in Manhattan federal court. “An information advantage does not create a duty not to act.”
Goldman and Morgan Stanley also said there was no evidence they were trying to deceive anyone, and that Archegos had misled even them about the risks they faced.
Lawyers leading a committee representing the investors did not immediately respond Monday to requests for comment.
Archegos imploded after making big bets on stocks through securities known as total return swaps.
The resulting fire sale in stocks caused heavy losses at banks including Credit Suisse Group AG and Nomura Holdings Inc.
In April 2022, Archego founder Sung Kook “Bill” Hwang and former CFO Patrick Halligan were charged with fraud. Both have pleaded guilty.
The US Securities and Exchange Commission and the US Commodity Futures Trading Commission filed related civil lawsuits regarding the collapse.