Sung Kook (Bill) Hwang, founder and head of private investment firm Archegos, arrives at Manhattan Federal Court in New York City, U.S., July 9, 2024.
Andrew Kelly | Reuters
Archegos Capital Management founder Sung Kook “Bill” Hwang was convicted of fraud and other charges by a jury in Manhattan federal court on Wednesday in a criminal trial in which prosecutors accused him of manipulating the market before the 2021 crash of his $36 billion private equity firm. .
The jury, which began deliberations on Tuesday, found Hwang guilty of 10 of the 11 criminal charges and Patrick Halligan, his deputy and Archegos co-defendant, guilty of all three charges he faced. Hwang and Halligan sat surrounded by their lawyers as the verdict was read by a soft-spoken foreman.
Archego’s meltdown sent shockwaves across Wall Street and drew regulatory scrutiny on three continents. Prosecutors have said Hwang and Halligan lied to banks in order to obtain billions of dollars that they used to artificially inflate the stock prices of many publicly traded companies. The trial began in May.
Hwang, 60, had pleaded not guilty to one count of racketeering conspiracy, three counts of fraud and seven counts of market manipulation. Halligan, 47, had pleaded not guilty to one count of racketeering conspiracy and two counts of fraud. Halligan was the chief financial officer at Archegos.
They now face maximum sentences of 20 years in prison for each count they were convicted of, although any sentence would be much lower and would be decided by the judge based on a variety of factors.
When the charges were filed in 2022, the US Department of Justice called the case an example of its commitment to holding accountable people who distort and defraud US financial markets.
Jurors heard closing arguments Tuesday.
The trial centered on the implosion of Hwang’s family office, Archegos, which caused $10 billion in losses to global banks and, according to prosecutors, more than $100 billion in shareholder losses in its portfolio companies. Prosecutors said Hwang’s actions harmed U.S. financial markets as well as ordinary investors, causing significant losses to banks, market participants and Archego employees.
According to prosecutors, Hwang secretly amassed large stakes in multiple companies without actually holding their shares. Hwang lied to banks about the size of Archego’s derivatives positions in order to borrow billions of dollars that he and his deputies then used to artificially inflate the underlying stock, prosecutors said.
Halligan was accused by prosecutors of lying to banks and facilitating the criminal scheme.
During closing arguments, Assistant U.S. Attorney Andrew Thomas told jurors: “By 2021, the defendants’ lies and manipulations had ensnared nearly a dozen stocks and half of Wall Street in a $100 billion fraud, a hoax that collapsed within days.”
Hwang’s defense team described the indictment as “the most aggressive open market manipulation case” ever brought by US prosecutors. Hwang’s attorney, Barry Berke, told jurors in his closing argument that prosecutors criminalized aggressive but legal trading methods.
Archego Chief Trader William Tomita and Chief Risk Officer Scott Becker testified as prosecution witnesses after pleading guilty to related charges and agreeing to cooperate in the case.
According to the US Attorney’s Office for the Southern District of New York, which brought the case, Hwang’s positions eclipsed those of the companies’ largest investors, driving up stock prices. At its peak, prosecutors said Archegos had $36 billion in assets and $160 billion in stock exposure.
When share prices fell in March 2021, banks demanded additional deposits, which Archegos could not make. Banks then sold the shares backing Hwang’s swaps, wiping out an estimated $100 billion in value for shareholders and billions in banks, including $5.5 billion for Credit Suisse, now part of UBS, and $2.9 billion for Nomura Holdings .