Bill Hwang, former head of investment fund Archegos, found guilty of fraud

After a two-month trial “that captivated Wall Street,” Bill Hwang, real name Sunn Kook-hwang, was found guilty of fraud and market manipulation on Monday, July 8, by a Manhattan court.

The former head of the investment fund Archegos was accused of having defrauded several banks “by lying to them about his company’s trading activity and the risk level of his portfolio,” reports Bloomberg. In 2021, the bankruptcy of Archegos cost Credit Suisse $5.5 billion, precipitating the collapse of the second largest Swiss bank, since bought by its rival UBS.

By borrowing billions of dollars while hiding the positions he was taking from his creditors, Bill Hwang had managed to quadruple, in record time, the valuation of Viacom CBS, the conglomerate that brought together the companies in which he had invested his fortune. But in March 2021, Viacom’s stock collapsed, causing Archegos to go bankrupt. In two days, the financier lost “from 20 to 30 billion dollars” – no one had ever lost “so much money in such a short time”, underlines Bloomberg.

“Lying was part of the job”

Hwang had until then been considered “the best trader you’ve never heard of”, remember The weather. But the failure of his family office (a kind of private bank for the very wealthy) suddenly wiped out some 100 billion dollars of stock market capitalization, “harming the other shareholders of these companies and the establishments which had done business with Archegos, mainly banks”. These include Morgan Stanley, the Japanese bank Nomura, Credit Suisse – the worst hit – and its rival UBS, “who also lost feathers in the affair to the tune of 861 million dollars” loaned to Bill Hwang’s investment fund.

In Manhattan federal court, the prosecution’s key witnesses were Archegos’ former chief risk officer and former chief trading officer. Both admitted lying to banks to downplay the company’s risk and allow it to continue borrowing, noted The Wall Street Journal. “Lying was part of the job,” the prosecutor stressed.

Of the eleven counts against Bill Hwang, the court upheld ten. The trader faces a total of two hundred years in prison. Former Archegos CFO Patrick Halligan was also found guilty on all three counts.

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