Tuesday , July 16 2024

Archegos founder Bill Hwang guilty in multi-billion-dollar fraud case

The founder of US investment firm Archegos, Bill Hwang, was found guilty Wednesday of fraud and market manipulation in a case focused on the fund’s 2021 implosion that cost major banks billions of dollars.

A jury in New York convicted South Korean-born Hwang on 10 of the 11 charges he faced, according to U.S. media. He could spend the rest of his life in prison.

Hwang’s family-owned hedge fund had taken huge bets on a few stocks with money borrowed from banks, and when one of those bets soured, the fund was unable to meet “margin calls” to cover the losses.

The subsequent collapse of the fund sent shockwaves through the markets and caused $10 billion in losses for Credit Suisse, Nomura, Morgan Stanley and other large financial institutions.

Credit Suisse was the hardest hit — losing some $5.5 billion — which further weakened the bank and pushed it close to bankruptcy in 2023 before it was taken over by its Swiss rival UBS.

Archegos’s former chief financial officer, Patrick Halligan, was found guilty on the three counts of conspiracy, securities fraud and wire fraud he faced at the same trial.

During the case, the prosecution relied on two former Archegos executives, with one testifying that Hwang had instructed him to misrepresent Archegos’s finances.

The case came about after Archegos took stakes in several companies with the goal of driving up share prices, including in ViacomCBS, which is now Paramount Global.

At its peak in March 2021, Archegos was exposed to $160 billion through derivatives.

The plan worked initially — almost quadrupling the value of ViacomCBS — but quickly unraveled when that same company announced a capital increase in 2021, triggering a sudden sell-off on Wall Street.

This triggered a domino effect which plunged the value of shares held by Archegos and in turn hit the banks that had provided funds to Hwang’s firm.

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