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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 his fund, Archegos, collapsed, sending shockwaves through global stock markets and cost big banks billions of dollars in losses.
Wednesday’s verdict came after an eight-week trial in which prosecutors tried to prove that: fan He lied to lenders and “fooled the market” with secret trading strategies to inflate share prices of a handful of media and technology groups until a series of negative events led to a sudden sell-off in March 2021.
Hwang, 60, a devout Korean-born Christian who was once one of America’s wealthiest evangelicals, remained emotionless as the verdict was read and silently shook hands with his lawyers after the hearing. He is free on bail until his sentencing on October 28. His lead lawyer, Barry Burke, declined to comment on whether Hwang would appeal the sentence.
Damien Williams, who filed the lawsuit for the U.S. Attorney’s Office for the Southern District of New York, said Hwang “lied about Archegos’ positions in these companies and about virtually every key measure that investment banks would use to determine the company’s creditworthiness.”
During the trial, Burke argued that Hwang simply “bought these stocks because he liked them,” and accused the U.S. government of having “no theory” about how Hwang could have benefited from investing large amounts in specific companies.
Huang was convicted of 10 of the 11 charges. Archegos Chief Financial Officer Patrick Halligan, who was tried alongside Hwang, was also found guilty of three counts, including organized crime and fraud. The jury deliberated for about a day and a half before reaching its verdict.
Relatively unknown outside the financial districts of New York and Hong Kong worked Robertson worked at New York-based Tiger Management, founded by hedge fund pioneer Julian Robertson, from 1996 to 2001. He gained international notoriety in the spring of 2021 when it was revealed that his family office, Archegos, had been selling large amounts of shares in major companies including Discovery, Viacom and Tencent.
The fund was successful in acquiring large amounts of shares in specific companies by purchasing equity swaps, a technique that at the time allowed the buyers to hide their identities from the market at large.
“No market participant was able to trace the trades back to a single buyer,” Assistant U.S. Attorney Andrew Thomas said in closing arguments on Monday. “No one knew that Archegos was simultaneously submitting orders to multiple brokers.”
When banks that had lent money to Hwang learned that Archegos’ portfolio consisted of huge investments in a small number of companies, they demanded that Hwang put more money into his account to cover their risks, and then liquidated their positions when Hwang couldn’t repay them.
The subsequent sales caused combined losses of more than $10 billion to Archegos’ borrowers, including Credit Suisse, Nomura, Morgan Stanley and UBS, and forced some of Wall Street’s biggest banks to reassess their due diligence procedures.
The trial has unearthed one of the most damaging cases for Wall Street banks in recent years and revealed that their analysis of Archegos was at times outdated.
For months, bankers spoke with the Archegos team, trying to figure out what their positions were at other financial institutions, when in fact Mr. Hwang had amassed similar investments across Wall Street.
In one example, prosecutors showed messages from March 2021 when UBS executives were celebrating projections of about $50 million in annual fees from Archegos, just weeks after the Swiss bank would lose more than $800 million on trades with Archegos.
