Archegos Founder Faces Criminal Charges After Fund’s Spectacular Collapse
The highly anticipated criminal trial of Sung Kook “Bill” Hwang, former head of Archegos Capital Management, is set to commence this month in New York. Hwang’s defense team is preparing to contest a central argument from prosecutors, which they claim is an untested and ultimately unconvincing theory of market manipulation.
Archegos: A House of Cards Built on Leverage
Archegos, a family office managing Hwang’s personal wealth, reached a peak valuation of $36 billion. However, the fund’s reliance on excessive leverage and concentrated bets on a handful of stocks through complex derivatives proved disastrous. When these positions soured in March 2021, Archegos imploded spectacularly.
Prosecutors Allege Deception and Manipulation
Prosecutors for the Southern District of New York claim that Hwang and his associates deliberately misled banks about the true size of Archegos’ derivative holdings. This alleged deception allowed them to secure billions of dollars in loans, which were then used to artificially inflate the stock prices of their target companies through open market purchases.
A Domino Effect of Losses
The dramatic collapse of Archegos in March 2021 triggered a chain reaction. Global banks were left with an estimated $10 billion in losses, with Credit Suisse taking a particularly hard hit of $5.5 billion. This blowup further destabilized the Swiss bank, contributing to its own downfall in 2022.
Beyond financial institutions, prosecutors allege that Archegos’ demise also resulted in over $100 billion in shareholder losses at the companies whose stocks it had heavily manipulated.
Hwang Maintains Innocence, Defense Questions Strategy
Hwang, known for his aggressive investment style, has pleaded not guilty and vehemently denies all charges. His legal team contends that the government’s case hinges on a novel and ultimately flawed theory of market manipulation. In a December court filing, they labeled it the “most aggressive open market manipulation case ever” brought by prosecutors.
