Archegos’ Bill Hwang could spend the rest of his life behind bars after disastrous bets led to the collapse of Credit Suisse
The founder of fund manager Archegos could spend the rest of his life behind bars after his speculative bets cost global investment banks a total of $10 billion three years ago.
A federal jury in Manhattan found Sung Kook “Bill” Hwang, 60, guilty of multiple counts of fraud for lying to creditors about billions of dollars in bets on stocks including streaming service provider ViacomCBS. Hwang lost everything in March 2021 after ancestors Paramount shocked the market with a surprise stock sale that brought his plans crashing down.
“This verdict sends a resounding message that the agency will continue to monitor financial markets with an eagle eye and swiftly hold accountable those who think they can cheat the system,” US Attorney Damian Williams said in a statement. declare on Wednesday.
The jury members sided with the federal prosecutor after key witnesses including Archegos’ former chief risk officer and head trader testified that they misled creditors about the size and concentration of their bets in order to boost returns.
Also convicted of doing false assurances is Hwang’s 47-year-old chief financial officer, Patrick Halligan.
CFO intends to appeal jury verdict
The couple was accused of lying to several people. investment bankingThe most famous is Credit Suisse. Severely damaged by the Archegos scandal, Confidence in Zurich lenders has evaporated despite repeated efforts to restore confidence in its risk culture. That is swallow launched by UBS last year following the bankruptcy of Silicon Valley Bank spectacular collapse.
Both now face up to 20 years in prison for each fraud charge. Both men remain free on bail ahead of their scheduled sentencing date of October 28.
Hwang’s lawyer could not be reached. Luck for comment, but Halligan’s attorney, Mary Mulligan, told the media that her client would continue to fight. “We intend to appeal and are confident that our client will be vindicated,” she was quoted as saying by media outlets.
Big red flags from the start
Founded in 2001 and formerly known as Tiger Asia, Hwang’s company is known as “Baby tiger”, a money manager launched by Tiger Management alumniThe hugely successful hedge fund run by Julian Robertson in the 1990s.
But Hwang’s recent actions aren’t the first time he’s attracted the attention of prosecutors. After Admit Following a 2012 federal wire fraud conviction in the United States involving insider trading in Hong Kong-listed Chinese bank stocks, his Tiger Asia fund returned assets to outside clients, converted into a family office to hedge his bets, and changed its name to Archegos.
At the time, Hwang was already a key client of Credit Suisse’s prime brokerage division, which serves the bank’s most lucrative trading clients like hedge funds and family offices with a range of tailored services.
‘One-time, isolated event’
An internal investigation by Credit Suisse has found that many of its employees no warning sign for senior management when it comes to doing business with big players.
Trading fees with Hwang generated millions of dollars in revenue, and the brokerage firm did not end the relationship even after Hong Kong authorities banned Hwang from trading stocks on its exchange for four years.
US bank managers reported to their superiors in Zurich that it was just a “individual, one-time event” in a fairly productive relationship and the business continued.
Selling streaming stocks accidentally blew a fuse
Fast forward to 2021, and Hwang’s family office appears to be thriving: its net worth has grown from half a billion dollars at the start to $10 billion. What analysts didn’t know was that Hwang appears to have been running from one Wall Street investment bank to another to borrow money to fund his speculative bets, which focused on hot tech and media stocks like ViacomCBS and Tencent Music Entertainment.
Everything came crashing down in March of that year, when ViacomCBS announced a $3 billion stock sale. The industry was enjoying a pandemic lockdown. Gold Rush in Streaming Stocks and CEO Bob Bakish need to build a content library large enough for its Paramount+ service to absorb Netflix And Disney.
Bakish inadvertently triggered the collapse of Hwang’s fund. With $5.1 billion invested, ViacomCBS was Hwang’s largest long position, and the impending dilution from the immediate sale of shares caused prices fall.
Urgent sale to rival UBS
While worried Credit Suisse risk managers scheduled several calls asking Archegos to post more collateral as insurance — all of which Hwang’s team canceled at the last minute — the bank’s prime brokerage division helped secure an additional $2.4 billion in the crucial few days leading up to its collapse.
As rivals on Wall Street began to learn of Archegos’ cash crunch, some banks liquidated much of their exposure to Archegos. wipe out $100 billion of various securities in the process and pushed Hwang’s company into bankruptcy.
By the time Zurich finally asked Hwang to deposit $2.8 billion to cover their exposure, he told the Swiss bank that margin calls from other prime brokers had depleted their reserves. Credit Suisse and, to a much lesser extent, its Japanese rival Nomura had suffered.
Credit Suisse then could not escape its reputation as Europe’s most scandal-ridden bank and when SVB collapsed, the result was shaking the whole area proved too much. The Swiss government stepped in to broker an emergency rescue by cross-town rival UBS, end of nearly 170 years of history.
