Trial Begins For Bill Hwang Over Collapse of $36 Billion Archegos Fund

Rachel Acenas
By Rachel Acenas
May 8, 2024News
Trial Begins For Bill Hwang Over Collapse of $36 Billion Archegos Fund
Archegos Capital Management owner Bill Hwang leaves federal court in Manhattan on April 27, 2022. (Spencer Platt/Getty Images)

The criminal racketeering trial of billionaire trader Sung Kook “Bill” Hwang kicked off on Wednesday, three years after his fund’s rapid meltdown rocked Wall Street.

The co-founder of Archegos Capital Management attended the first day of juror screening in a Manhattan federal courtroom. Mr. Hwang, 60, has pleaded not guilty to 11 federal charges, including fraud and market manipulation. Each count carries a maximum sentence of 20 years in prison.

Chief Financial Officer Patrick Halligan also faces charges in the case. He, too, was present for Wednesday’s jury selection. Both men will stand trial together.

Twelve jurors and four alternates will serve in the trial, which Wall Street is expected to watch closely.

Archegos was considered a limited partnership family office that managed Mr. Hwang’s personal assets, which at one point totaled $36 billion.

According to court documents, this case involves a massive stock scheme in which the defendants engaged in a web of deceptive practices to inflate the value of certain publicly traded stocks. According to prosecutors, Mr. Hwang covertly and artificially drove up the stock price of a handful of listed companies.

“This case involves a fraudulent scheme by Defendants that included interlocking deceptive acts and misconduct, through false and misleading statements to security-based swap counterparties and prime brokers and manipulative trading designed to artificially move the market, which, in tandem, increased Archegos’s assets under management from around $4 billion to over $36 billion in just under six months,” the complaint states.

Under Mr. Hwang’s direction, Archegos experienced rapid and exponential growth from March 2020 through March 2021. However, stock prices later plummeted, and the firm’s portfolio collapsed faster than it grew, according to prosecutors.

“Eventually, the weight of Defendants’ fraudulent and manipulative scheme was too much for Archegos to bear, and over the course of less than a week in late March 2021, the house of cards collapsed,” according to the complaint.

Archegos was unable to meet significant margin calls triggered by price declines in some of the firms’ top ten holdings. The firm’s subsequent default sent shockwaves through the U.S. market.

“More than $100 billion in apparent market value for nearly a dozen public companies disappeared within days,” according to the 2022 indictment. It also left banks with more than $10 billion dollars in losses.

The fallout hit Credit Suisse, Nomura, Morgan Stanley and UBS just to name a few, which all took substantial hits from Archegos’ rapid collapse.

Mr. Hwang’s lawyers described the case as the “most aggressive open market manipulation ever” brought by prosecutors, according to a December court filing. U.S. District Judge Alvin Hellerstein, who is presiding over the trial, previously rejected the defense’s motion to dismiss the case.

This isn’t the first time that the billionaire trader has faced legal challenges. In 2012, Mr. Hwang paid $44 million to settle U.S. insider trading charges after his hedge fund business, Tiger Asia Management, shut down due to losses and regulatory issues.

Meanwhile, two former Archegos colleagues have pleaded guilty to related charges. Archageos Chief Risk Officer Scott Becker and head trader William Tomia are expected to testify at the trial. Executives from top Wall Street banks will also testify.

Opening statements have been scheduled for Monday. The trial is expected to last eight weeks.

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