Archegos Capital Management Founder Convicted of Securities and Market Manipulation Fraud

Introduction

Bill Hwang, the founder of Archegos Capital Management, a hedge fund that collapsed in 2021, has been convicted of securities and market manipulation fraud. The conviction comes after a jury found him guilty of 10 criminal counts, including six counts of market manipulation. The scheme, which prosecutors say cost global investment banks billions of dollars, involved artificially inflating the values of nearly a dozen stocks before the investments collapsed.

The Scheme

According to prosecutors, Hwang and his co-conspirators used stock derivatives to secretly build large positions in a few companies. They lied to banks to get billions of dollars to grow their investment firm, which was based in New York. The portfolio grew from $10 billion to $160 billion. The indictment said that the investment public did not know Archegos had come to dominate the trading and stock ownership of multiple companies because it used securities that had no public disclosure requirement.

The Consequences

The risky maneuvers made the firm’s portfolio vulnerable to price fluctuations in a handful of stocks. Margin calls in late March 2021 wiped out more than $100 billion in market value in just days. Nearly a dozen companies, as well as banks and prime brokers, lost billions as a result. The jury also convicted the company’s former financial officer, Patrick Halligan.

The Trial

Hwang’s lawyer, Barry Berke, argued that his client was an honest investor who put money into stocks he believed in. Berke told the jury that Hwang "didn’t live the life of a billionaire" and didn’t make any misrepresentations to any banks about his business. However, prosecutors said Hwang lied to banks to get billions of dollars to grow his investment firm.

The Verdict

The jury found Hwang guilty of 10 criminal counts, including six counts of market manipulation. He was acquitted of one charge of market manipulation but was convicted of six others. Hwang looked straight ahead as the verdict was read, taking several sips of water.

Conclusion

The conviction of Bill Hwang and his former financial officer, Patrick Halligan, marks a significant victory for prosecutors in their efforts to hold accountable those responsible for the collapse of Archegos Capital Management. The scheme, which cost global investment banks billions of dollars, highlights the importance of transparency and honesty in the financial industry.

FAQs

Q: What was Archegos Capital Management?
A: Archegos Capital Management was a hedge fund founded by Bill Hwang.

Q: What was the scheme?
A: The scheme involved artificially inflating the values of nearly a dozen stocks before the investments collapsed.

Q: How much did the scheme cost?
A: The scheme cost global investment banks billions of dollars.

Q: Who was convicted?
A: Bill Hwang, the founder of Archegos Capital Management, and Patrick Halligan, the company’s former financial officer, were convicted of securities and market manipulation fraud.

Q: What was the outcome of the trial?
A: The jury found Hwang guilty of 10 criminal counts, including six counts of market manipulation. He was acquitted of one charge of market manipulation but was convicted of six others.

Q: What is the significance of the conviction?
A: The conviction highlights the importance of transparency and honesty in the financial industry and serves as a warning to others who may engage in similar schemes.

Author: fortune.com

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