The 2021 collapse of Song Kook “Bill” Hwang’s Archegos Capital Management was driven by “lies and manipulation,” federal prosecutors said Monday in a criminal trial over the collapse of a private investment fund worth a combined $36 billion.
Jurors heard closing arguments from the prosecution and defense in Manhattan federal court in the trial of Hwang and Archegos co-defendant Patrick Harrigan.
The trial revolves around the collapse of Hwang’s family office, Archegos, whose dramatic collapse caused banks around the world to lose $10 billion and, according to prosecutors, caused shareholders of portfolio companies to lose more than $100 billion.
Hwang’s lawyer, Barry Burke, told jurors that Archegos collapsed in March 2021 due to a series of unexpected events and that prosecutors had criminalized aggressive but legal trading techniques. If the bank had not suffered losses, “we wouldn’t be here and Mr. Hwang would not be facing charges,” Burke said.
Assistant U.S. Attorney Andrew Thomas told the jury that Hwang manipulated stock prices and conspired with Halligan to lie to clients’ banks.
“By 2021, the defendants’ lies and manipulation had led to a $100 billion fraud that compromised the stocks of nearly 10 companies and half of Wall Street, and the fraud collapsed within days,” Thomas said.
Testimony at the trial, which began in May, revealed that Hwang had instructed Archegos employees to lie to banks and make trades designed to inflate the prices of stocks he bet on, Mr. Thomas said. Mr. Hwang “acted as if the rules didn’t apply to him,” Mr. Thomas added. In fact, the two defendants “made a living from fraud,” Mr. Thomas said.
Prosecutors have accused Hwang of secretly holding huge stakes in several companies without actually owning the stocks. They say Hwang lied to banks about the size of Archegos’ derivatives trades and borrowed billions of dollars that he and his associates used to inflate the prices of the underlying shares.
Hwang, 60, has pleaded not guilty to one count of organized crime conspiracy and 10 counts of fraud and market manipulation. His lawyers have called the case “the most aggressive open market manipulation case” prosecutors have ever brought. Halligan, 47, has pleaded not guilty to fraud and organized crime conspiracy charges.
If convicted, he faces up to 20 years in prison on each charge, although his sentence will likely be much lighter and would be imposed by the judge based on a variety of factors.
Archegos’ head trader, William Tomita, and chief risk officer, Scott Becker, pleaded guilty to related charges and agreed to cooperate with prosecutors before testifying.
Burke told jurors Monday that Becker testified that he lied but not at Hwang’s direction and that Tomita told prosecutors what they wanted to hear.
Harrigan’s lawyer, Timothy Hagerty, said in closing arguments that the case against his client was based on Becker’s testimony and that Becker lied on the stand.
Hwang’s assets eclipsed those of the two companies’ biggest investors, driving up their stock prices, according to the U.S. Attorney’s Office for the Southern District of New York, which filed the case. At its peak, Archegos had $36 billion in assets and $160 billion in equity exposure, prosecutors said.
When stock prices fell in March 2021, the banks asked for more deposits, but Archegos couldn’t make them. The banks then sold the shares backing Hwang’s swaps, costing shareholders $100 million and the banks $40 billion in losses, including $5.5 billion for Credit Suisse, now owned by UBS, and $2.9 billion for Nomura Holdings.
