Archegos founder Bill Hwang convicted in fraud trial over fund collapse | Business and economic news

Archegos Capital Management founder Sung Kook “Bill” Hwang was convicted of fraud and other charges by a jury in Manhattan federal court in a criminal trial in which prosecutors accused him of market manipulation before the collapse of his investment firm. deprived of 36 billion dollars in 2021.

On Wednesday, the jury, which began deliberations on Tuesday, found Hwang guilty on 10 of 11 criminal counts, and Patrick Halligan, his deputy and co-defendant at Archegos, guilty on all three charges he faced. Hwang and Halligan sat next to their lawyers as the verdict was read by a soft-spoken aide.

U.S. District Judge Alvin Hellerstein set sentencing for October 28. Both men will remain free on bail.

The collapse of Archegos sent shockwaves through Wall Street and drew regulatory scrutiny on three continents. Prosecutors said Hwang and Halligan lied to banks to obtain billions of dollars that they used to artificially inflate the stock prices of several publicly traded companies. The trial began in May.

Hwang, 60, has pleaded not guilty to one count of racketeering conspiracy, three counts of fraud and seven counts of market manipulation. Halligan, 47, has pleaded not guilty to one count of racketeering conspiracy and two counts of fraud. Halligan was Archegos’ chief financial officer.

They now face maximum sentences of 20 years in prison for each charge of which they were convicted, although any sentence would likely be much lower and would be imposed by the judge based on a number of factors.

When the charges were brought in 2022the US Department of Justice considered the case an example of its commitment to holding accountable those who distort and defraud US financial markets.

Jurors heard closing arguments on Tuesday.

Implosion

The trial focused on the implosion of Hwang’s Archegos family office, which inflicted $10 billion in losses on global banks and, according to prosecutors, caused 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 Archegos employees.

Hwang secretly accumulated outsized stakes in several companies without actually owning his shares, according to prosecutors. Hwang lied to banks about the size of Archegos derivative positions in order to borrow billions of dollars that he and his representatives used to artificially inflate the underlying stocks, 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 fraud that collapsed in a matter of days. .”

Hwang’s defense team described the prosecution 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 business methods.

Archegos lead trader William Tomita and chief risk officer Scott Becker testified as witnesses for the prosecution after pleading guilty to related charges and agreeing to cooperate in the case.

According to the U.S. 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 equity exposure.

When share prices fell in March 2021, banks required additional deposits, which Archegos was unable to make. The banks then sold the shares backing Hwang’s swaps, wiping out an alleged $100 billion in shareholder value and billions in bank value, including $5.5 billion for Credit Suisse, now part of UBS, and $2.9 billion for Nomura Holdings.