Dive Overview:
A federal jury in Manhattan on Wednesday convicted Archegos Capital Management founder Sung-Kook “Bill” Hwang on 10 of 11 charges, including fraud.
Co-defendant Patrick Halligan, Archegos’ chief financial officer, was convicted on all three counts, including fraud and organized crime.
Archegos’ collapse caused the investment bank to lose around $10 billion. Credit Suisse, which has since been bought by UBS, lost $5.5 billion when the private investment firm collapsed in 2021. Meanwhile, Japan’s Nomura lost nearly $2.9 billion.
Dive Insights:
The jury delivered its verdict on Wednesday after a day and a half of deliberation, ending the eight-week trial. Huang and Halligan are free on bail until their sentencing, scheduled for Oct. 28.
The executives face up to 20 years in prison for each charge they are convicted of, but the sentences could be mitigated depending on several factors.
Prosecutors alleged that Mr. Hwang and Mr. Halligan misled banks to secure billions of dollars in loans and artificially inflate stock prices. They alleged that Mr. Hwang used derivative transactions and loans provided by Wall Street banks to secretly build up large holdings of companies’ stock without directly owning the stock.
Archegos’ sudden collapse wiped out much of his personal wealth and became a drag on Wall Street powerhouses, including Morgan Stanley, which had helped the firm trade.
Credit Suisse’s $5.5 billion loss on its exposure to Archegos likely hastened the bank’s collapse. The Federal Reserve UBS $268.5 million The lawsuit was filed over “unsafe and unsound counterparty credit risk management practices” between Credit Suisse and Archegos. The central bank claimed that Credit Suisse had failed to properly manage Archegos’ exposure, despite repeated warnings.
During the trial, Hwang’s lead lawyer, Barry Burke, argued that his client “bought these stocks because he liked them,” and that the U.S. government did not have a theory to prove how Hwang benefited from inflating shares of certain companies. Financial Times report.
“This sentence should send a strong message that regulators will continue to keep a keen eye on financial markets and swiftly hold accountable those who believe they can game the system,” Manhattan U.S. Attorney Damien Williams, who prosecuted Hwang and Halligan, said in a statement. Bloomberg.
Hwang faced multiple criminal charges, including one count of organized crime conspiracy, three counts of fraud and seven counts of market manipulation.
He pleaded not guilty to all charges but was found not guilty on 10 counts, including one count of market manipulation related to the Chinese online video company iQIYI. Halligan was convicted on three charges, including organized crime and fraud.
Burke did not immediately comment on the sentence, but Halligan’s lawyer, Mary Mulligan, said: The New York Times They intend to appeal.
Prosecutors indicted Messrs. Hwang and Harrigan a year after Archegos collapsed, and the firm’s head trader, William Tomita, and chief risk officer, Scott Becker, testified against their former bosses and pleaded guilty to related charges.
Hwang’s financial career was checkered from the start. He worked at Julian Robertson’s famed hedge fund Tiger Management before founding Tiger Asia Management in 2001. The firm grew quickly initially but faced financial losses and regulatory problems in Hong Kong and the United States, forcing it to suspend operations in 2012. Hwang pleaded guilty to wire fraud in connection with illegal trading of Chinese stocks and settled U.S. insider trading charges for $44 million.
He converted Tiger Asia into a family-run business in early 2013 and changed its name to Archegos Capital Management.
