Bill Hwang, the founder of Archegos Capital Management, is set to go on trial in Manhattan federal court on charges of securities fraud, wire fraud, conspiracy, racketeering, and market manipulation. The collapse of Archegos in 2021 led to significant losses for Wall Street banks, with federal prosecutors alleging that the firm engaged in a stock market manipulation scheme that inflated share prices using borrowed money from banks. Hwang, along with former CFO Patrick Halligan, is facing trial for their involvement in the scheme, which saw the firm’s value reach over $100 billion at its peak.
The U.S. attorney for the Southern District of New York in Manhattan has called Archegos’s scheme “historic in scope,” highlighting the magnitude of the alleged market manipulation. Barry Berke, Hwang’s lawyer, has declined to comment on the case, while Mary Mulligan, Halligan’s lawyer, stated that the case should not have been brought. Archegos, although not widely known before its collapse, operated with a level of risk typically associated with large hedge funds, leveraging borrowed funds to amplify its stock investments and profits.
Following the collapse of Archegos, several Wall Street banks incurred losses, with Credit Suisse, UBS, Nomura, and Morgan Stanley among those affected. Credit Suisse alone lost $5.5 billion, leading to regulatory actions and penalties for its risk management failures in the Archegos affair. Hwang could potentially face up to 220 years in prison if convicted on all counts, though a more realistic sentence could be 20 years. The trial begins with jury selection, with prosecutors planning to call former Archegos employees who have agreed to cooperate with the investigation as witnesses.
Prosecutors have alleged that officials at Archegos misled banks about the firm’s market exposure, and Hwang engaged in a “pump and brag scheme” to inflate the firm’s stock holdings and portray himself as extremely wealthy. However, the prosecutors have not yet explained how Hwang intended to profit from driving up stock prices. The federal judge in the case expressed confusion about Hwang’s strategy, questioning his motives and goals in continuously buying more shares. Testimony about potential exit strategies for Hwang is expected to be presented during the trial.
This is not the first time Hwang has faced allegations of violating federal securities laws. In 2012, he settled a civil case with the SEC related to insider trading at his former hedge fund Tiger Asia Management, leading to a $44 million fine. While Hwang was not criminally charged in that case, Tiger Asia pleaded guilty to federal insider trading charges. Hwang was barred from managing public money for five years, and the ban was lifted in 2020. Instead of managing money for outside investors, he focused on managing funds for himself and his family, ultimately leading to the downfall of Archegos.
