Archegos Founder Found Guilty in $36B Fraud Case, Faces Up to 20 Years in Prison

July 11, 2024 12:26 pm

A federal
jury in Manhattan has found Sung Kook “Bill” Hwang, founder of
Archegos Capital Management, guilty of fraud and market manipulation in
connection with the spectacular collapse of his $36 billion investment firm in
2021. The verdict, delivered after a day and a half of deliberations, marks the
culmination of a closely watched trial that sent shockwaves through Wall
Street.

Hwang was convicted
on 10 out of 11 criminal counts
, including racketeering conspiracy, fraud,
and market manipulation. His co-defendant, Patrick Halligan, who served as
Archegos’ chief financial officer, was found guilty on all three counts he
faced.

Prosecutors
alleged that Hwang and Halligan orchestrated a scheme to deceive banks and
artificially inflate stock prices, leading to Archegos’ implosion and billions
in losses for global financial institutions and shareholders.

US attorney Damian Williams

According
to the US attorney Damian Williams, this verdict sends a clear message that
those “who this they can cheat the system” will be held accountable. The
defendants’ actions not only harmed banks and market participants, but also
ordinary investors and Archegos employees.

Potential 20 Years Behind
Bars

During the
trial, which began in May, the prosecution presented evidence that Hwang
secretly amassed enormous positions in various companies through complex
derivative instruments, while misrepresenting the true extent of Archegos’
exposure to lenders. When stock prices began to fall in March 2021, the firm
was unable to meet margin calls, triggering a cascade of forced liquidations
that wiped out an estimated $100 billion in shareholder value.

Defense
attorneys argued that Hwang’s trading strategies, while aggressive, were legal
and that prosecutors had overreached in their charges. However, the jury was
ultimately convinced by the government’s case, which included testimony from
former Archegos executives who had previously pleaded guilty to related
charges.

US District
Judge Alvin Hellerstein has set sentencing for October 28. Both Hwang and
Halligan face potential maximum sentences of 20 years in prison for each count,
although actual sentences are likely to be lower based on various factors.

The
conviction marks a second fall from grace for Hwang, who previously faced
regulatory issues with his hedge fund, Tiger Asia Management, in 2012. That
case resulted in Hwang pleading guilty to wire fraud and paying $44 million to
settle insider trading charges.

Negative Impact on the Broader Market

The
collapse of Archegos resulted in significant losses for several major banks,
including Credit Suisse and Nomura Holdings, which reported losses of $5.5
billion and
$2.9 billion
, respectively. According to analysts, the losses incurred by
the Swiss bank due to the collapse of the investment firm were one of several
major factors ultimately leading
to the eventual bankruptcy
of Credit Suisse, which UBS ultimately took
over
.

In
addition, Morgan Stanley experienced around $911 million in losses from its
exposure to Archegos, though it managed to absorb the impact without severe
long-term consequences. At the same time, UBS suffered losses of about $861
million related to Archegos, prompting a review of its risk management
strategies.

A federal
jury in Manhattan has found Sung Kook “Bill” Hwang, founder of
Archegos Capital Management, guilty of fraud and market manipulation in
connection with the spectacular collapse of his $36 billion investment firm in
2021. The verdict, delivered after a day and a half of deliberations, marks the
culmination of a closely watched trial that sent shockwaves through Wall
Street.

Hwang was convicted
on 10 out of 11 criminal counts
, including racketeering conspiracy, fraud,
and market manipulation. His co-defendant, Patrick Halligan, who served as
Archegos’ chief financial officer, was found guilty on all three counts he
faced.

Prosecutors
alleged that Hwang and Halligan orchestrated a scheme to deceive banks and
artificially inflate stock prices, leading to Archegos’ implosion and billions
in losses for global financial institutions and shareholders.

US attorney Damian Williams

According
to the US attorney Damian Williams, this verdict sends a clear message that
those “who this they can cheat the system” will be held accountable. The
defendants’ actions not only harmed banks and market participants, but also
ordinary investors and Archegos employees.

Potential 20 Years Behind
Bars

During the
trial, which began in May, the prosecution presented evidence that Hwang
secretly amassed enormous positions in various companies through complex
derivative instruments, while misrepresenting the true extent of Archegos’
exposure to lenders. When stock prices began to fall in March 2021, the firm
was unable to meet margin calls, triggering a cascade of forced liquidations
that wiped out an estimated $100 billion in shareholder value.

Defense
attorneys argued that Hwang’s trading strategies, while aggressive, were legal
and that prosecutors had overreached in their charges. However, the jury was
ultimately convinced by the government’s case, which included testimony from
former Archegos executives who had previously pleaded guilty to related
charges.

US District
Judge Alvin Hellerstein has set sentencing for October 28. Both Hwang and
Halligan face potential maximum sentences of 20 years in prison for each count,
although actual sentences are likely to be lower based on various factors.

The
conviction marks a second fall from grace for Hwang, who previously faced
regulatory issues with his hedge fund, Tiger Asia Management, in 2012. That
case resulted in Hwang pleading guilty to wire fraud and paying $44 million to
settle insider trading charges.

Negative Impact on the Broader Market

The
collapse of Archegos resulted in significant losses for several major banks,
including Credit Suisse and Nomura Holdings, which reported losses of $5.5
billion and
$2.9 billion
, respectively. According to analysts, the losses incurred by
the Swiss bank due to the collapse of the investment firm were one of several
major factors ultimately leading
to the eventual bankruptcy
of Credit Suisse, which UBS ultimately took
over
.

In
addition, Morgan Stanley experienced around $911 million in losses from its
exposure to Archegos, though it managed to absorb the impact without severe
long-term consequences. At the same time, UBS suffered losses of about $861
million related to Archegos, prompting a review of its risk management
strategies.

Feed from Financemagnates.com

MoneyMaker FX EA Trading Robot