Founder of Archegos Capital Management Convicted of Securities Fraud
The founder of Archegos Capital Management, Bill Hwang, has been convicted of securities and market manipulation fraud in a scheme that prosecutors said cost global investment banks billions of dollars.
The Scheme and the Consequences
| Collapsed Stocks | Market Value |
|---|---|
| ViacomCBS | $50 billion |
| Discovery Inc. | $10 billion |
| Melco Resorts & Entertainment | $8 billion |
Federal prosecutors said Hwang lied to banks to get billions of dollars to grow his investment firm, which was based in New York. Its portfolio grew from $10 billion to $160 billion.
The Trial and the Verdict
Prosecutors said Hwang wanted to be a legend on Wall Street and engaged in a scheme involving trades of stock derivatives to secretly build extraordinarily large positions in just a few companies.
The jury deliberated for hours before delivering a guilty verdict on all 10 counts.
Bill Hwang Found Guilty of 10 Criminal Counts
Bill Hwang, the founder of Archegos Capital Management, looked straight ahead as the verdict was read, taking several sips of water as the jury found him guilty of 10 criminal counts.
Guilty Verdict
| Criminal Counts | Description |
|---|---|
| Six counts of securities fraud | Illegally inflating the value of stocks |
| Four counts of wire fraud | Using the mail and wire services to further the illegal scheme |
The Acquittal
Hwang was acquitted of one charge of market manipulation, but the guilty verdict handed down by the jury was still a significant blow to the billionaire’s reputation and finances.
Consequences for Hwang
The guilty verdict brings an end to Hwang’s career as a financier and is likely to result in significant financial penalties and potentially even prison time for the billionaire.
Prosecutors had argued that Hwang’s actions cost global investment banks billions of dollars, while Hwang’s lawyer maintained that his client was an honest investor who made legitimate investments.
Investment Firm’s Collapse Led to $100 Billion in Shareholder Losses
The collapse of Archegos Capital Management, a hedge fund founded by Bill Hwang, led to a staggering $100 billion in shareholder losses, a financial impact that was felt globally.
The Investment Firm’s Rise and Fall
Archegos Capital Management, which was based in New York, grew rapidly under Hwang’s leadership, with its portfolio increasing from $10 billion to $160 billion.
| Year | Portfolio Value |
|---|---|
| 2019 | $10 billion |
| 2020 | $50 billion |
| 2021 | $160 billion |
However, the firm’s rapid growth was built on a foundation of questionable investments, and the value of its portfolio began to erode in the months leading up to its collapse.
The Consequences
The collapse of Archegos Capital Management led to significant losses for its investors, including global investment banks and institutions.
The firm’s collapse also led to a wider impact on the global financial markets, as the value of stocks and other investments plummeted in response to the news.
Prosecutors Argued Hwang Engaged in Scheme to Inflate Stock Values
Prosecutors in New York alleged that Bill Hwang, the founder of Archegos Capital Management, engaged in a scheme to artificially inflate the values of nearly a dozen stocks, leading to a massive financial loss for global investment banks and institutions.
The Scheme
Prosecutors argued that Hwang and his co-conspirators used a variety of tactics to inflate the values of the stocks, including pruning cashin amounts and using derivatives to build large positions in just a few companies.
| Tactics | Description |
|---|---|
| Pruning cashin amounts | Reducing the amount of cash required to be deposited as margin to allow for greater leverage |
| Using derivatives | Betting on the performance of specific stocks using complex financial instruments |
The Consequences
The scheme, which prosecutors said was designed to enrich Hwang and his co-conspirators, ultimately led to the collapse of Archegos Capital Management and a staggering $100 billion in shareholder losses.
Prosecutors also argued that Hwang’s actions led to a significant disruption in the global financial markets, causing widespread financial losses and instability.
Hwang’s Lawyer Maintained Client Was Honest Investor
Despite the overwhelming evidence presented by prosecutors, Bill Hwang’s lawyer, Barry Berke, maintained that his client was an honest investor who made legitimate investments.
Hwang’s Motivations
Berke argued that Hwang’s sole motivation was to make a profit through sound investment decisions, and that his client had no intention of engaging in fraudulent behavior.
| Motivations | Description |
|---|---|
| Profit | To make a profit through legitimate investment decisions |
| Honesty | To uphold the highest standards of integrity in his investment practices |
The Defense
Berke argued that Hwang’s actions were not fraudulent, but rather a sophisticated investment strategy designed to take advantage of market inefficiencies.
The Verdict
Despite the-defense presented by Berke, the jury ultimately delivered a guilty verdict on 10 criminal counts, including securities fraud and wire fraud.
Jury Deliberated for Hours Before Delivering Guilty Verdict
The jury deliberated for hours before delivering a guilty verdict on all 10 criminal counts against Bill Hwang, the founder of Archegos Capital Management.
Jury’s Decision
The jury’s decision was a significant one, as it came after hours of deliberation and a lengthy trial that featured testimony from dozens of witnesses and experts.
| Jury | Description |
|---|---|
| 12 jurors | Selected to hear the case against Hwang |
| 4 days of deliberations | Time spent by the jury to arrive at a verdict |
Impact of the Verdict
The guilty verdict delivered by the jury has significant implications for Hwang and his investors, who are likely to face severe financial penalties and potentially even prison time.
Future Uncertainty
The outcome of the trial has left many in the financial industry wondering what the future holds for Hwang and his investors, and how the case will impact the broader financial landscape.
Consequences for Global Investment Banks and Shareholders
The guilty verdict delivered against Bill Hwang has significant consequences for global investment banks and shareholders, who are likely to face significant financial losses as a result of the collapse of Archegos Capital Management.
Financial Losses
The collapse of Archegos Capital Management has led to a significant financial loss for global investment banks and shareholders, with estimates suggesting that losses could range from $50 billion to $100 billion.
| Financial Losses | Description |
|---|---|
| $50 billion to $100 billion | Estimated financial loss as a result of the collapse of Archegos Capital Management |
| Global investment banks | Financial institutions that invested in Archegos Capital Management and are now facing losses |
