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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 implosion of his Archegos fund sent shockwaves through global stock markets and left big banks with billions of dollars in losses.
The verdict on Wednesday came after an eight-week trial in which prosecutors sought to prove that Hwang lied to creditors and “conned the market” with secret trading strategies that allowed him to boost the share price of a handful of media and technology groups. before a series of adverse events led to a sudden sell-off in March 2021.
Hwang, 60, a devout South Korean-born Christian who was once one of the wealthiest evangelicals in America, was expressionless as the verdict was read and calmly shook hands with his legal team after the trial ended. He remains free on bail pending sentencing on October 28. His lead attorney, Barry Berke, declined to say whether Hwang would appeal the verdict.
U.S. Attorney Damian Williams, whose office in the Southern District of New York prosecuted the case, said Hwang “lied about Archegos’ positions in these companies and almost every other material metric that investment banks would use in determining a firm’s creditworthiness.”
During the trial, Berke argued that Hwang only “bought these stocks because he loved them” and accused the US government of having “no theory” about how his client would fare if he benefited from building large positions in specific companies.
Hwang was found guilty of 10 of the 11 charges he faced. Former Archegos CFO Patrick Halligan, who was tried alongside Hwang, was also found guilty of three counts, including extortion and fraud. The jurors deliberated for about a day and a half before returning their decision.
Relatively unknown outside the financial districts of New York and Hong Kong, Hwang worked from 1996 to 2001 at New York-based Tiger Management, founded by hedge fund pioneer Julian Robertson. He rose to international prominence in the spring of 2021, when his family office Archegos was revealed to be behind a sharp selloff in major stocks including Discovery, Viacom and Tencent.
The fund was able to accumulate large stakes in specific companies by buying stock swaps, a method that at the time allowed the buyer to hide their identity from the wider market.
“No market participant could trace the trading back to a single buyer,” Assistant U.S. Attorney Andrew Thomas said in closing arguments Monday. “Nobody saw Archegos placing simultaneous orders to multiple brokers.
Once the banks that had lent to Hwang realized that Archegos’ portfolio consisted of excessive bets in a handful of companies, they demanded that he deposit more funds into his accounts to cover the risk and unwind their positions when he defaulted.
The subsequent selloff left Archegos’ 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 Wall Street’s biggest banks.
The trial also revealed one of the most painful incidents in recent years for Wall Street banks and shed light on what was sometimes a hackneyed analysis they conducted in relation to Archegos.
Over the course of several months, bankers spoke to the team at Archegos to try to decipher what their positions were at other lenders — when in fact Hwang had amassed similar investments on Wall Street.
In one case, prosecutors showed reports from March 2021 in which UBS executives celebrated estimates of about $50 million in annual fees from Archegos. Just a few weeks later, the Swiss bank would lose more than $800 million due to Archegos deals.