Sung Kook “Bill” Hwang, the founder of Archegos Capital Management, has been convicted of fraud by a Manhattan jury after the 2021 collapse of his firm.
Hwang was accused of running a criminal conspiracy and committing securities and wire fraud, and was found guilty on 10 of 11 criminal counts with Patrick Halligan, his Archegos deputy and co-defendant, guilty on all three counts.
Wall Street lost billions in the fallout of the collapse of Archegos, with Credit Suisse taking serious losses that eventually led to its collapse and sale to UBS last year, later agreeing to pay almost $400m in fines for the firm’s relation to Archegos.
Hwang set up Archegos over a decade ago as a family office, but following the start of the coronavirus pandemic, ballooned in size from around $10bn to over $160bn thanks to strong investment performance and borrowing from banks.
In 2020, the firm returned 134 per cent and started 2021 by more than doubling, documents at the trial showed.
However, federal prosecutors claimed that Hwang had mislead banks in order to borrow billions which it used to drive up prices of a small number of stocks in Archegos’ portfolio, through the use of equity swaps that can conceal the purchaser’s identity.
Prosecutors said that Hwang had “lied about Archegos’s positions in these companies and just about every other materially important metric investment banks would use in determining the firm’s creditworthiness”.
“That’s what it meant to run Archegos,” added assistant US attorney Andrew Thomas. “Lying was part of the job.”
Once banks realised that Hwang had concentrated its portfolio in just a handful of companies, they demanded Archegos put up more cash that it wasn’t able to pay, leading to its collapse.
Judge Alvin Hellerstein set the sentencing for the two men, who remain free on bail, for 28 October.