Archegos Capital Management founder Sung Kook “Bill” Hwang, also known as Huang Chengguo, was found guilty of fraud and other charges by a jury on Wednesday, July 10. Prosecutors accused him of market manipulation before the collapse of Archegos in 2021.
In 2021, the Archegos liquidation event caused a stir on Wall Street and led to regulatory scrutiny across three continents. The event resulted in global banks losing billions of dollars, including $5.5 billion by Credit Suisse (now part of Credit Suisse Group) and $2.9 billion by Nomura Holdings, causing shareholders to suffer losses of over $100 billion.
Some media outlets dubbed the event as the “largest single-day loss in history” and the “century’s biggest liquidation.”
Prosecutors alleged that Bill Hwang and Archegos Chief Financial Officer Patrick Halligan lied to banks, obtained billions of dollars, and artificially inflated the stock prices of several listed companies.
The trial began in May this year, with the jury delivering its verdict on Wednesday at the Manhattan Federal Court. The jury found Bill Hwang guilty on 10 of the 11 criminal charges and all three charges against Halligan.
US District Judge Alvin Hellerstein will sentence them on October 28.
Manhattan Federal Prosecutor Damian Williams stated that this verdict sends a clear message that his office will hold accountable those who believe they can deceive the system.
Bill Hwang pleaded not guilty to one count of conspiracy to commit extortion, three counts of fraud, and seven counts of market manipulation. Halligan pleaded not guilty to one count of conspiracy to commit extortion and two counts of fraud.
They could face a maximum sentence of 20 years in prison for each charge. The judge will consider various factors in determining the actual penalties, which are expected to be much lower.
Prosecutors alleged that Hwang used total return swaps to secretly amass significant holdings in multiple companies without actually owning the stocks, misleading banks about the scale of Archegos’ derivative positions to borrow billions of dollars. They used this money to artificially boost the stock prices of several listed companies, with Archegos having $36 billion in assets and $160 billion in stock exposure at its peak.
Prosecutors said Hwang’s actions harmed the US financial market and ordinary investors, resulting in significant losses for banks, market participants, and Archegos employees.
Halligan was accused of lying to banks and facilitating the criminal scheme.
In closing arguments on Tuesday, Assistant US Prosecutor Andrew Thomas told the jury, “In 2021, the defendants’ lies and manipulations plunged nearly ten stocks and half of Wall Street into a $100 billion fraud, which unraveled within days.”
Bill Hwang’s defense team portrayed the indictment as the most aggressive public market manipulation case in US prosecution history. Hwang’s lawyer Barry Berke told the jury in closing arguments that the prosecutors criminalized a trading approach that was radical but legal.
Archegos Chief Trader William Tomita and Chief Risk Officer Scott Becker admitted to related charges and agreed to testify as prosecution witnesses after cooperating in this case.
Wednesday’s conviction marks the second time Bill Hwang has been penalized for illegal trading.
Before founding Archegos, the Korean-American fund manager worked at Tiger Management, the hedge fund of billionaire Julian Robertson, which was once the world’s largest hedge fund.
After working at Tiger Fund for five years, Hwang, with Robertson’s support, founded Tiger Asia Management LLC in 2001, a subsidiary of Tiger Fund in Asia. After a decade, Tiger Asia’s annualized returns were outstanding, and the assets under management grew rapidly.
However, losses and regulatory issues in Hong Kong and the US led to the company’s closure in 2012. At that time, Hwang admitted to wire fraud related to illegal trading of Chinese stocks and paid $44 million to settle insider trading charges in the US.
In early 2013, Hwang transformed Tiger Asia into a family office and renamed it Archegos Capital Management. Archegos means “leader” in Greek.
Due to Hwang’s regulatory issues, Wall Street banks initially approached him cautiously, but Nomura Bank eventually gave him a second chance. Over the 8-year period from 2013 to 2020, Archegos’ net asset value increased from $2 billion to $10-15 billion, with estimates suggesting that, leveraged, Archegos’ total positions reached $50 to $100 billion at the time.