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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 collapse of his Archegos fund sent shockwaves through global stock markets and left banks large fed billions of dollars in losses.
The ruling on Wednesday came after an eight-week trial in which prosecutors sought to prove that Hwang lied to lenders and “misled the market” with secret trading strategies that allowed him to drive up the share price of a small media and technology group. before a series of adverse events led to an unexpected sale in March 2021.
Hwang, 60, a devout Christian born in South Korea who was once one of America’s richest evangelicals, was speechless as the verdict was read and calmly shook hands with his legal team as the proceedings ended. He remains free on bail pending sentencing on October 28. His lead lawyer Barry Berke declined to say whether Hwang would appeal the decision.
U.S. Attorney Damian Williams, whose office in the Southern District of New York prosecuted the case, said Hwang had “lied about Archego’s positions in these companies and almost every other material investment metric banks would use in determining creditworthiness of the firm”.
During the trial, Berke had argued that Hwang simply “bought these shares because he wanted them” and accused the US government of having “no theory” as to how his client would have stood to benefit from building large positions in companies special.
Hwang was found guilty of 10 of the 11 charges he faced. Archego’s former chief financial officer Patrick Halligan, who was tried alongside Hwang, was also found guilty of three charges, including racketeering and fraud. Jurors deliberated for about a day and a half before returning their verdict.
Relatively unknown outside financial circles in New York and Hong Kong, Hwang worked at New York-based Tiger Management, founded by hedge fund pioneer Julian Robertson, from 1996 to 2001. He rose to international prominence in the spring of 2021, when his family office Archegos was revealed to be behind a sale of major stakes including Discovery, Viacom and Tencent.
The fund had managed to accumulate large stakes in individual companies by buying equity swaps, a method that at the time allowed buyers to hide their identity from the wider market.
“No market participant could trace the trade back to a single buyer,” Assistant U.S. Attorney Andrew Thomas said in closing arguments Monday. “No one could see that Archegos was placing simultaneous orders on multiple agents.”
Once the banks that had lent to Hwang began to realize that Archego’s portfolio consisted of large bets on a handful of companies, they demanded that he deposit more funds into his accounts to cover the risk and undo the positions of them when he failed to pay.
The ensuing sale left Archego’s lenders — including Credit Suisse, Nomura, Morgan Stanley and UBS — with combined losses of more than $10 billion and prompted an overhaul of due diligence processes at some of the world’s biggest banks. Wall Street.
The trial also unearthed one of the most painful incidents in recent years for Wall Street banks and shed light on what was at times an ambiguous analysis of Archegos.
For several months, bankers talked to the team at Archegos to try to decipher what their positions were at other lenders — when in reality Hwang had amassed similar investments all over Wall Street.
In one case, prosecutors showed messages from March 2021, when UBS executives were celebrating forecasts of about $50 million in annual fees from Archegos. Just a few weeks later, the Swiss bank would lose more than $800 million because of its deals with Archegos.