Archegos Capital Management founder Sung Kook “Bill” Hwang has been found guilty of fraud and other charges by a jury in Manhattan federal court in a criminal trial in which prosecutors accused him of market manipulation ahead of the 2021 collapse of his $36 billion private investment firm.
On Wednesday, the jury, which began deliberating Tuesday, found Hwang guilty on 10 of 11 criminal counts and Patrick Halligan, his deputy at Archegos and co-defendant, guilty on all three counts he faced. Hwang and Halligan sat flanked by their lawyers as a soft-spoken spokesman read the verdict.
U.S. District Judge Alvin Hellerstein set sentencing for Oct. 28. Both men will remain free on bail.
The Archegos crisis sent shockwaves through Wall Street and drew the attention of regulators on three continents. Prosecutors have 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 conspiracy to commit racketeering, three counts of fraud and seven counts of market manipulation. Halligan, 47, has pleaded not guilty to one count of conspiracy to commit racketeering and two counts of fraud. Halligan was Archegos’ chief financial officer.
They now face maximum sentences of 20 years in prison for each charge they were convicted of, though any sentence would likely be much less and would be imposed by the judge based on a variety of factors.
When the charges were filed in 2022, the U.S. Justice Department called the case an example of its commitment to holding accountable those who distort and defraud U.S. financial markets.
Jurors heard closing arguments on Tuesday.
Implosion
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 losses to shareholders of 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.
According to prosecutors, Hwang secretly amassed outsized stakes in several companies without actually owning their shares. Hwang lied to banks about the size of Archegos derivative positions to borrow billions of dollars that he and his deputies then used to artificially inflate the underlying stocks, prosecutors said.
Prosecutors accused Halligan of lying to the banks and facilitating the criminal scheme.
During closing arguments, Assistant U.S. Attorney Andrew Thomas told jurors: “By 2021, the defendants’ lies and manipulation had ensnared nearly a dozen stocks and half of Wall Street in a $100 billion fraud — a fraud that unraveled in a matter of days.”
Hwang’s defense team described the indictment as the “most aggressive open market manipulation case” ever brought by U.S. prosecutors. Hwang’s attorney, Barry Berke, told jurors in his closing argument that prosecutors criminalized aggressive but legal trading methods.
Archegos' chief trading officer, 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 U.S. Attorney’s Office for the Southern District of New York, which brought the case, Hwang’s positions dwarfed those of the companies’ largest investors, driving up stock prices. At its peak, prosecutors said Archegos had $36 billion in assets and $160 billion of equity exposure.
When stock prices fell in March 2021, banks demanded 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 value for shareholders and billions at the banks, including $5.5 billion for Credit Suisse, now part of UBS, and $2.9 billion for Nomura Holdings.
