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| Bill Hwang was arrested and charged with investment fraud. |
An indictment was unsealed Wednesday (April 27) charging Hwang, and Halligan with racketeering conspiracy, securities fraud, and wire fraud offenses in connection with interrelated schemes to illegaly manipulate the prices of publicly traded securities in Archegos’s portfolio and to defraud many leading global investment banks and brokerages.
“We allege that these defendants and their co-conspirators lied to banks to obtain billions of dollars that they then used to inflate the stock price of a number of publicly-traded companies,” said U.S. Attorney Damian Williams for the Southern District of New York.
“The lies fed the inflation, and the inflation led to more lies. Round and round it went. In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio. But last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.”
Who is Bill Hwang?
Hwang was born in the mid-1960s and raised as a devout Christian. His father was a church pastor and his mother served as a missionary in Mexico, he said in a 2018 interview promoting communal bible readings.
Hwang holds an economics degree from UCLA and a MBA from Carnegie Mellon, an online biography shows.
According to a Market Insider profile, Hwang " smiles a lot, cracks jokes, and comes across as humble in the interview. He doesn't take himself too seriously, but clearly feels a burning desire to spread the gospel."
Hwang says his faith has guided him throughout his entire career. He sees investing as his calling, and believes God "loves" when he backs companies that contribute to humanity's progress. "It's not all about money," he said in another 2018 interview.
After a series of investment positions, he founded Tiger Asia, an investment firm. In 2012 he pleaded guilty to insider trading through his Tiger Asia firm and paid a penalty of $60 million to settle civil and criminal charges of manipulating Chinese stocks.
How Hwang's alleged scheme worked
“Today’s announcement demonstrates the department’s unwavering commitment to hold accountable individuals who distort and defraud our financial markets, including those who occupy the C-Suite,” said Deputy Attorney General Monaco. “That is especially true for this kind of crime — the kind that leaves a financial crater in its wake.”
Also unsealed Wednesday are the guilty pleas of Scott Becker and William Tomita in connection with their participation in the conspiracy. Becker pleaded guilty pursuant to an information before U.S. District Judge Laura Taylor Swain on April 21. Tomita pleaded guilty pursuant to an information before Judge Swain on April 21. Both are cooperating with the government.
Also unsealed Wednesday are the guilty pleas of Scott Becker and William Tomita in connection with their participation in the conspiracy. Becker pleaded guilty pursuant to an information before U.S. District Judge Laura Taylor Swain on April 21. Tomita pleaded guilty pursuant to an information before Judge Swain on April 21. Both are cooperating with the government.
“Today’s announcement demonstrates the department’s unwavering commitment to hold accountable individuals who distort and defraud our financial markets, including those who occupy the C-Suite,” said Deputy Attorney General Monaco. “That is especially true for this kind of crime — the kind that leaves a financial crater in its wake.”
The full scale of the fallout from Archegos blowing up won't be known for a while but according to the allegations in the indictment unsealed Wednesday in Manhattan federal court some detailed were revealed:
Sung Kook (Bill) Hwang is the founder and owner of Archegos Capital Management and its related business entities, which are collectively known as Archegos. As alleged, Hwang, along with Patrick Halligan, Scott Becker and William Tomita lied to banks to obtain billions of dollars that they then used to artificially inflate the stock price of a number of publicly traded companies.
Hwang and his co-conspirators invested in stocks mostly through special contracts with banks and brokers called “swaps.” As alleged, these swaps allowed Hwang to cause massive buying of certain stocks, including at carefully selected days and times, to artificially pump up stock prices. Hwang, Halligan and their co-conspirators lied to banks and used a series of manipulative trading techniques to keep those prices high and prevent them from falling. This led to inflation of these stock prices. In one year, Hwang turned a $1.5 billion portfolio and fraudulently pumped it up into a $35 billion portfolio.
Last year, when the prices fell, Hwang’s positions were sold off and he could no longer manipulate the prices, and billions of dollars of capital evaporated nearly overnight.
As alleged, the defendants committed this fraud in secret. Since 2014, Hwang has run Archegos as a private hedge fund or “family office,” meaning that Archegos, unlike other large hedge funds, was not required to tell regulators information about its holdings and debt that might have shined a light on the fraud and allowed the crisis to be averted.
And because Hwang traded mostly through swaps, he was able to do the buying alleged in the indictment without anyone knowing that Archegos was actually behind all the trading. Regular market participants, and even the companies themselves, were duped into thinking the price increases were caused by the normal interplay of supply and demand when, instead, as alleged, they were the artificial result of Hwang’s manipulative trading.
For example, as alleged, by March 24, 2021, Hwang effectively controlled more than 50% of the freely trading shares of Viacom – and no one outside of Archegos knew about it — not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps. Because, as alleged, by using various banks and brokerages for his swaps, Hwang made sure that no single institution would have any idea that he was behind all of this trading.
The indictment further alleges that in order to get the billions of dollars Archegos needed to sustain this market manipulation scheme, Hwang and his co-conspirators lied to and misled some of Wall Street’s leading banks about how big Archegos’s investments had become, how much cash Archegos had on hand and the nature of the stocks that Archegos held. As alleged, they told those lies so that the banks would have no idea what Archegos was really up to, how risky the portfolio was, and what would happen if the market turned.
As alleged, just over a year ago, the market turned and the stock prices Hwang and his co-conspirators had artificially inflated crashed, causing immense damage to U.S. financial markets and ordinary investors. In a matter of days, the companies at the center of Archegos’s trading scheme lost more than $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed.
Sung Kook (Bill) Hwang is the founder and owner of Archegos Capital Management and its related business entities, which are collectively known as Archegos. As alleged, Hwang, along with Patrick Halligan, Scott Becker and William Tomita lied to banks to obtain billions of dollars that they then used to artificially inflate the stock price of a number of publicly traded companies.
Hwang and his co-conspirators invested in stocks mostly through special contracts with banks and brokers called “swaps.” As alleged, these swaps allowed Hwang to cause massive buying of certain stocks, including at carefully selected days and times, to artificially pump up stock prices. Hwang, Halligan and their co-conspirators lied to banks and used a series of manipulative trading techniques to keep those prices high and prevent them from falling. This led to inflation of these stock prices. In one year, Hwang turned a $1.5 billion portfolio and fraudulently pumped it up into a $35 billion portfolio.
Last year, when the prices fell, Hwang’s positions were sold off and he could no longer manipulate the prices, and billions of dollars of capital evaporated nearly overnight.
As alleged, the defendants committed this fraud in secret. Since 2014, Hwang has run Archegos as a private hedge fund or “family office,” meaning that Archegos, unlike other large hedge funds, was not required to tell regulators information about its holdings and debt that might have shined a light on the fraud and allowed the crisis to be averted.
And because Hwang traded mostly through swaps, he was able to do the buying alleged in the indictment without anyone knowing that Archegos was actually behind all the trading. Regular market participants, and even the companies themselves, were duped into thinking the price increases were caused by the normal interplay of supply and demand when, instead, as alleged, they were the artificial result of Hwang’s manipulative trading.
For example, as alleged, by March 24, 2021, Hwang effectively controlled more than 50% of the freely trading shares of Viacom – and no one outside of Archegos knew about it — not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps. Because, as alleged, by using various banks and brokerages for his swaps, Hwang made sure that no single institution would have any idea that he was behind all of this trading.
The indictment further alleges that in order to get the billions of dollars Archegos needed to sustain this market manipulation scheme, Hwang and his co-conspirators lied to and misled some of Wall Street’s leading banks about how big Archegos’s investments had become, how much cash Archegos had on hand and the nature of the stocks that Archegos held. As alleged, they told those lies so that the banks would have no idea what Archegos was really up to, how risky the portfolio was, and what would happen if the market turned.
As alleged, just over a year ago, the market turned and the stock prices Hwang and his co-conspirators had artificially inflated crashed, causing immense damage to U.S. financial markets and ordinary investors. In a matter of days, the companies at the center of Archegos’s trading scheme lost more than $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed.
Market participants who purchased the relevant stocks at artificial prices lost the value they believed their investments held, the banks lost billions of dollars, and Archegos employees, many of whom were required to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars.
Hwang and Halligan were arrested prior to the announcement and were presented before U.S. Magistrate Judge Jennifer E. Willis. The case has been assigned to U.S. District Judge Andrew L. Carter, Jr.
Also unsealed Wednesday are the guilty pleas of Scott Becker and William Tomita in connection with their participation in the conspiracy. Becker pleaded guilty pursuant to an information before U.S. District Judge Laura Taylor Swain on April 21. Tomita pleaded guilty pursuant to an information before Judge Swain on April 21. Both are cooperating with the government.
Anyone who thinks they are victims of the alleged scheme are encouraged to contact law enforcement at USANYS.ARCHEGOS@USDOJ.GOV.
EDITOR'S NOTE: For additional commentary, news and views from an AAPI perspective, follow @DioknoEd on Twitter.
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