Archegos founder Bill Hwang found guilty in fund collapse

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A New York jury has found former Wall Street trader Bill Hwang guilty of fraud and market manipulation, more than three years after the implosion of his Archegos fund roiled global stock markets and cost major banks billions of dollars in losses.

Wednesday’s verdict came after an eight-week trial in which prosecutors tried to prove Hwang lied to lenders and “cheated” the market with secret trading strategies that helped drive up the share prices of a handful of media and technology groups before a series of adverse events led to a sudden sell-off in March 2021.

Hwang, 60, a devout Christian born in South Korea who was once one of the wealthiest evangelicals in America, was expressionless as the verdict was read and calmly shook hands with his legal team after the proceedings were over. He remains free on bail until the Oct. 28 sentencing. His lead lawyer, Barry Berke, declined to say whether Hwang would appeal the verdict.

U.S. Attorney Damian Williams, whose office in the Southern District of New York brought the case, said Hwang “lied about Archegos’s positions in these companies and virtually every other materially important measure that investment banks would use in determining the company’s creditworthiness.”

During the trial, Berke argued that Hwang bought the stocks only “because he liked them” and accused the U.S. government of having “no theory” about how his client might have profited from building up excessive positions in specific companies.

Hwang was found guilty on 10 of the 11 counts he was charged with. Former Archegos CFO Patrick Halligan, who was tried alongside Hwang, was also found guilty on three counts, including racketeering and fraud. The jurors deliberated for about a day and a half before announcing their verdict.

Hwang is relatively unknown outside the financial districts of New York and Hong Kong. From 1996 to 2001, he worked at Tiger Management in New York, founded by hedge fund pioneer Julian Robertson. He gained international notoriety in the spring of 2021, when it emerged that his family office Archegos was behind a sell-off of major stocks including Discovery, Viacom and Tencent.

The fund had managed to acquire large stakes in specific companies through share swaps, a method that allowed the buyer to conceal his identity from the rest of the market at the time.

“No market participant could trace the trade to a single buyer,” Assistant U.S. Attorney Andrew Thomas said in his closing arguments Monday. “No one could see that Archegos was placing orders with multiple brokers simultaneously.”

When the banks that had lent Hwang money realized that Archegos’ portfolio consisted of excessive investments in a handful of companies, they demanded that he deposit more money into his accounts to cover the risk. When he didn’t pay, they had to unwind their positions.

The ensuing sell-off left Archegos’ lenders — including Credit Suisse, Nomura, Morgan Stanley and UBS — with a collective loss of more than $10 billion and led to a review of due diligence processes at some of Wall Street’s biggest banks.

The lawsuit also exposed one of the most painful incidents in recent years for Wall Street banks, shedding light on the sometimes superficial analyses they made regarding Archegos.

For months, bankers met with the Archegos team to try to figure out what their positions were with other lenders, when in fact Hwang had made similar investments on Wall Street.

In one case, prosecutors produced messages from March 2021, when UBS executives celebrated predictions of about $50 million in annual fees from Archegos. Just weeks later, the Swiss bank would lose more than $800 million because of its Archegos trades.

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