Hwang Sung-kook “Bill” Hwang tried to defraud all of Wall Street, federal prosecutors told a federal jury in Manhattan after the 2021 collapse of Hwang’s $36 billion fund, Archegos Capital Management. The trial on charges stemming from the incident began on Monday.
Prosecutors allege that Mr. Hwang and Mr. Archegos lied to Wall Street banks to secure billions of dollars in funds that they used to inflate stock prices.
They allege that former Archegos chief financial officer Patrick Harrigan, who is also on trial, enabled the scheme.
Prosecutors also allege Archegos’ failure cost shareholders of companies in its portfolio more than $100 billion in losses and harmed investors who sold their shares after the scheme failed.
Mr. Huang and Mr. Harrigan have pleaded not guilty.
Assistant U.S. Attorney Alexandra Rothman told a jury of 12 people that Mr. Huang sought to become a Wall Street legend by inflating the value of his holdings through manipulative trading and turning Archegos into a criminal enterprise.
“Bill Huang was a billionaire, but he risked almost everything because he wanted more money, more success, more power,” she said.
“To those in the know, he was a great investor. He had everything. But it wasn’t enough,” Rothman added.
The case is attracting attention on Wall Street as a test of prosecutors’ ambitious market manipulation theories.
This is expected to shed light on the inner workings of banks’ profitable but risky transactions with customers.
Mr. Huang’s lawyer, Barry Burke, told jurors that his client was betting his cash on companies he trusted deeply and trading as if he was prepared to lose everything. Ta.
“He did it because he had the courage to stand up for his beliefs,” Burke said.
Mr. Harrigan’s lawyer, Mary Mulligan, said her client is not a risk taker, but a novice who views the company’s financial position as solid.
Mulligan said the banks that worked with Archegos knew the risks and continued doing business with the company anyway in pursuit of profits.
Testimony in the trial, which could last up to eight weeks, will center on the collapse of Mr. Hwang’s loosely regulated family-owned investment firm Archegos, which prosecutors say is a total shareholder of more than $100 billion in companies in the group’s portfolio. Alleges that it caused the loss.
The lawsuit is among several filed by U.S. Attorney Damian Williams alleging misconduct by powerful investors during the wild market volatility during the COVID-19 pandemic. This is one of them.
Prosecutors have accused Hwang of using financial contracts known as total return swaps to secretly amass large amounts of stock in multiple companies without actually owning the shares.
His position was so large that it exceeded that of the company’s largest investor, pushing up the stock price, prosecutors said. At Archegos’ peak, he had $36 billion in assets and $160 billion in equity exposure, they said.
The stock price decline in March 2021 resulted in a margin call, which Archegos was unable to meet. As a result, some banks unloaded the stocks that backed his swaps, leaving banks including Morgan Stanley, Credit Suisse (now part of UBS) and Nomura Holdings with billions of dollars. caused a loss.
Huang and Harrigan are charged with racketeering conspiracy. Mr. Huang faces 10 additional counts of fraud and market manipulation, and Mr. Harrigan faces two additional counts of fraud. Each charge carries a possible maximum sentence of 20 years in prison.
Mr. Hwang’s lawyer called the case “the most aggressive open market manipulation case ever” brought by prosecutors. Lawyers told Reuters it could be a difficult case for the government.
Archegos head trader William Tomita and chief risk officer Scott Becker have pleaded guilty to related charges and are expected to testify at trial. Some bank executives may also take the stand.
