Source: AFP
The founder of US investment firm Archegos, Bill Hwang, was found guilty on Wednesday of fraud and market manipulation in a case centered on the 2021 fund collapse that cost big banks billions of dollars.
A jury in New York convicted the South Korean-born Hwang of 10 of the 11 charges he faced, according to US media. He could spend the rest of his life in prison.
Hwang’s family hedge fund had taken huge bets on a few stocks with money borrowed from banks, and when one of those bets fell through, the fund was unable to respond to “margin calls” to cover losses.
The fund’s subsequent collapse shocked markets and caused $10 billion in losses for Credit Suisse, Nomura, Morgan Stanley and other major financial institutions.
Credit Suisse was hardest hit — losing about $5.5 billion — which further weakened the bank and pushed it close to bankruptcy in 2023 before Swiss rival UBS bought it.
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Archegos’ former chief financial officer, Patrick Halligan, was found guilty of three counts of conspiracy, securities fraud and wire fraud in the same trial.
During the case, the prosecution relied on two former Archegos executives, with one testifying that Hwang had instructed him to falsify Archegos’ finances.
The case arose after Archegos took stakes in several companies with the goal of boosting stock prices, including ViacomCBS, which is now Paramount Global.
At its peak in March 2021, Archegos was exposed to $160 billion through derivatives.
The plan initially worked — nearly quadrupling the value of ViacomCBS — but quickly fell apart when the same company announced a capital increase in 2021, prompting a sudden sell-off on Wall Street.
This caused a domino effect that sank the value of shares held by Archegos and in turn hit the banks that had provided capital to Hwang’s company.
Source: AFP
