Key Insights
- Archegos founder Bill Hwang found guilty of fraud and market manipulation in $36 billion firm collapse.
- Co-defendant Patrick Halligan also convicted; both face up to 20 years in prison per count.
- Collapse led to billions in losses for major banks, contributing to Credit Suisse’s eventual downfall.
NEW YORK (MarketsXplora) – A Manhattan federal jury on Wednesday 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.
Hwang was convicted on 10 out of 11 criminal counts, including racketeering conspiracy, fraud, and market manipulation. His co-defendant, Patrick Halligan, Archegos’ former chief financial officer, was found guilty on all three counts he faced.
The verdict came after a day and a half of deliberations, concluding a closely watched trial that began in May and sent shockwaves through Wall Street.
Archegos CEO Bill Hwang found guilty. His fraud caused losses of ~$10B. The avg American earns ~$1.7M in his entire life. What sentence could possibly be appropriate for a crime that destroys more wealth than 5,882 people will make in their entire lives? pic.twitter.com/yAXjhoW9Yj
— Nobody Special (@JG_Nuke) July 10, 2024
U.S. Attorney Damian Williams said the verdict sends a clear message that those “who think they can cheat the system” will be held accountable. He emphasized that the defendants’ actions harmed not only banks and market participants but also ordinary investors and Archegos employees.
Prosecutors alleged that Hwang and Halligan orchestrated a scheme to deceive banks and artificially inflate stock prices, using complex derivative instruments to secretly amass enormous positions in various companies. When stock prices fell in March 2021, Archegos was unable to meet margin calls, triggering a cascade of forced liquidations that wiped out an estimated $100 billion in shareholder value.
The collapse resulted in significant losses for several major banks. Credit Suisse reported losses of $5.5 billion, which analysts say contributed to its eventual bankruptcy and takeover by UBS. Nomura Holdings lost $2.9 billion, while Morgan Stanley and UBS suffered losses of $911 million and $861 million, respectively.
Defense attorneys argued that Hwang’s trading strategies, while aggressive, were legal and that prosecutors had overreached. However, the jury was swayed by the government’s case, which included testimony from former Archegos executives who had previously pleaded guilty to related charges.
U.S. District Judge Alvin Hellerstein 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.
This marks a second fall from grace for Hwang, who previously faced regulatory issues with his hedge fund, Tiger Asia Management, in 2012. In that case, Hwang pleaded guilty to wire fraud and paid $44 million to settle insider trading charges.
The Archegos collapse and subsequent trial have prompted a broader discussion about risk management strategies in the financial industry, with several banks reviewing their practices in the wake of the firm’s implosion.