By Jonathan Stempel
NEW YORK (Reuters) -Morgan Stanley, Goldman Sachs and Wells Fargo will pay a total of $120 million to settle a lawsuit claiming they hid conflicts of interest while sales of ViacomCBS shares helped fuel the collapse of Bill Hwang’s Archegos Capital Management.
A proposed final settlement with former shareholders of ViacomCBS, now known as Paramount Global, was filed this month in New York state court in Manhattan; it requires a judge’s approval.
Archegos, a family office that once managed $36 billion, imploded in March 2021 when Hwang could not meet margin calls on bank loans he obtained to make large bets in ViacomCBS and other media and technology stocks.
Investors led by the Camelot Event Driven Fund and the Municipal Police Employees’ Retirement System of Baton Rouge, Louisiana, accused banks of hiding their roles as Archegos counterparties and dumping their shares to avoid losses.
The defendants served as prime brokers for Archegos, which had about $20 billion of ViacomCBS exposure and had helped underwrite ViacomCBS common and preferred stock offerings in March 2021.
Morgan Stanley, Goldman and Wells Fargo denied wrongdoing in agreeing to settle, according to a court filing dated July 1.
It was unclear how much each would pay, but Morgan Stanley handled about 45% of the offerings and the other banks handled much less. All declined to comment on Monday.
Many other defendants were previously dismissed. Some court papers had been kept under seal. Bloomberg News reported the settlement earlier on Monday.
ViacomCBS common stock and preferred stock investors would receive $75 million and $45 million, respectively, minus legal fees and expenses, court papers show.
Their lawyers plan to seek 29% of the settlement fund, or about $35 million, for fees, the papers show.
Hwang and former Archegos chief financial officer Patrick Halligan were convicted of fraud in July last year over the firm’s collapse and sentenced to 18 years and eight years in prison, respectively. Both are appealing and free on bail.
The case is Camelot Event Driven Fund et al v Morgan Stanley & Co et al, New York State Supreme Court, New York County, No. 654959/2021.
(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)
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