ARCHEGOS Capital Management founder Sung Kook “Bill” Hwang was convicted of fraud and other charges by a jury in Manhattan federal court on Wednesday at a criminal trial in which prosecutors accused him of market manipulation ahead of the 2021 collapse of his US$36 billion private investment firm.
The jury, which began deliberations on Tuesday, found Hwang guilty on 10 of 11 criminal counts and Patrick Halligan, his Archegos deputy and co-defendant, guilty on all three counts he faced. Hwang and Halligan sat flanked by their lawyers as the verdict was read by a soft-spoken foreperson.
US District Judge Alvin Hellerstein set the sentencing for Oct 28. Both men will remain free on bail.
The Archegos meltdown sent shock waves across Wall Street and drew regulatory scrutiny on three continents. Prosecutors have said Hwang and Halligan lied to banks in order to obtain billions of dollars that they used to artificially pump up the stock prices of multiple publicly traded companies. The trial began in May.
Damian Williams, the US attorney in Manhattan, said the verdict should send a clear message that his office will hold accountable people like Hwang and Halligan “who think they can cheat the system.”
Hwang, 60, had pleaded not guilty to one count of racketeering conspiracy, three counts of fraud and seven counts of market manipulation. Hwang was acquitted on a market manipulation charge related to a Chinese online video company, iQIYI.
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Halligan, 47, had pleaded not guilty to one count of racketeering conspiracy and two counts of fraud. Halligan was the chief financial officer at Archegos.
They now face maximum sentences of 20 years in prison on each charge for which they were convicted, though any sentence would likely be much lower and would be imposed by the judge based on a range of factors.
The trial centered on the implosion of Hwang’s family office Archegos, which inflicted US$10 billion in losses at global banks and, according to prosecutors, and caused more than US$100 billion in shareholder losses at companies in its portfolio.
Prosecutors said Hwang’s actions harmed US financial markets as well as ordinary investors, causing significant losses to banks, market participants and Archegos employees.
Hwang secretly amassed outsized stakes in multiple companies without actually holding their stock, according to prosecutors. Hwang lied to banks about the size of the derivative positions of Archegos in order to borrow billions of dollars that he and his deputies then used to artificially inflate the underlying stocks, prosecutors said.
Halligan was accused by prosecutors of lying to banks and enabling the criminal scheme.
‘Lies and manipulation’
During closing arguments on Tuesday, Assistant US Attorney Andrew Thomas told jurors, “By 2021, the defendants’ lies and manipulation had ensnared nearly a dozen stocks and half of Wall Street in a US$100 billion fraud, a fraud that came crashing down in a matter of days.”
Hwang’s defence team painted the indictment as the “most aggressive open market manipulation case” ever brought by US prosecutors. Hwang’s attorney Barry Berke told jurors in his closing argument that prosecutors criminalised aggressive but legal trading methods.
Archegos head trader William Tomita and Chief Risk Officer Scott Becker testified as prosecution witnesses after pleading guilty to related charges and agreeing to cooperate in the case.
Prosecutors said Hwang’s positions eclipsed those of the companies’ largest investors, driving up stock prices. At its peak, prosecutors said Archegos had US$36 billion in assets and US$160 billion of exposure to equities.
When stock prices fell in March 2021, the banks demanded additional deposits, which Archegos could not make. The banks then sold the stocks backing Hwang’s swaps, wiping out an alleged US$100 billion in value for shareholders and billions at the banks, including US$5.5 billion for Credit Suisse, now part of UBS, and US$2.9 billion for Nomura Holdings.
Nomura declined comment and UBS did not immediately reply to a request for comment.
Wednesday’s conviction was the second fall from grace for Hwang.
Prior to Archegos, Hwang worked at Tiger Management, billionaire Julian Robertson’s pioneering hedge fund before Hwang launching his own hedge fund business, Tiger Asia Management, in 2001.
Tiger Asia grew quickly but losses and regulatory issues in Hong Kong and the United States led the firm to shut in 2012. Hwang pleaded guilty to wire fraud related to illegal trading of Chinese stocks and paid US$44 million to settle US insider trading charges.
Hwang turned Tiger Asia into a family office, renaming it Archegos Capital Management in early 2013. Wall Street banks were initially wary of Hwang due to his regulatory issues, but eventually Japan’s Nomura gave him a second chance. REUTERS
