As the trial of Archegos Capital Management founder Sung Kook “Bill” Hwang and his deputy Patrick Halligan nears its conclusion, federal prosecutors in Manhattan have presented a damning portrayal of their activities. Hwang and Halligan are accused of perpetrating one of the largest fraud schemes in recent financial history, leading to the dramatic collapse of the $36 billion private investment fund in 2021.
Closing Arguments in Manhattan Federal Court
In closing arguments delivered on Monday, Assistant U.S. Attorney Andrew Thomas emphasized the scope and impact of Hwang’s alleged manipulations. According to Thomas, Hwang and Halligan engaged in fraudulent practices that not only manipulated stock prices but also misled banks, resulting in significant financial turmoil.
“By 2021, the defendants’ lies and manipulation had ensnared nearly a dozen stocks and half of Wall Street in a $100 billion fraud, a fraud that came crashing down in a matter of days,” Thomas stated. The prosecution has painted a picture of Hwang as a billionaire driven by greed, risking nearly everything for greater wealth, success, and power.
Allegations of Deception and Manipulation
Hwang, who has pleaded not guilty to one count of racketeering conspiracy and 10 counts of fraud and market manipulation, allegedly amassed large stakes in multiple companies without holding their actual stocks. Instead, he is accused of using derivatives to create the illusion of substantial ownership. This strategy, according to prosecutors, allowed Hwang to deceive banks about the true size of Archegos’ positions, borrowing billions that were then used to inflate stock prices artificially.
Prosecutor Alexandra Rothman highlighted Hwang’s motivations during the trial, stating, “Bill Hwang was a billionaire and yet he risked nearly everything because he wanted more: more money, more success, more power.”
A courtroom scene with a judge, two lawyers presenting arguments, and attentive jurors.”
Defense Arguments and Potential Sentences
Hwang’s defense team argues that the prosecution’s case is unprecedented in its approach to market manipulation. Describing it as the “most aggressive open market manipulation case ever” brought by prosecutors, Hwang’s attorneys maintain that he acted with conviction, investing his own money in companies he believed in.
If convicted, both Hwang and Halligan face maximum sentences of 20 years in prison for each charge. However, any sentences would likely be influenced by various factors considered by the judge. Halligan, who also pleaded not guilty to fraud and racketeering conspiracy, is described by his attorney as a cautious “bean counter” who believed in the firm’s solid financial standing.
Testimonies and Witness Accounts
The trial featured testimonies from former Archegos insiders, including head trader William Tomita and Chief Risk Officer Scott Becker, who pleaded guilty to related charges and cooperated with prosecutors. Their testimonies provided insights into the deceptive practices at Archegos, detailing how the firm misrepresented its positions, portfolio concentration, and borrowings.
Robert Frenchman, an attorney experienced in market manipulation cases, noted the effectiveness of these witnesses. They have been “very effective in telling a troubling story about lying by Archegos,” Frenchman said, underscoring the prosecution’s unorthodox but compelling theory.
The Fallout and Broader Implications
The collapse of Archegos in March 2021 had far-reaching consequences. When stock prices fell, the banks demanded additional deposits from Archegos, which it could not provide. This led to a massive sell-off of the stocks backing Hwang’s swaps, resulting in $100 million in losses for shareholders and $40 billion for the banks involved. Major financial institutions such as Credit Suisse and Nomura Holdings suffered significant losses, with Credit Suisse alone incurring $5.5 billion in damages.
Prosecutors argue that Hwang’s positions, which at their peak reached $36 billion in assets and $160 billion of exposure to equities, were unsustainable and deceptive. The banks, eager to profit, continued trading with Archegos despite the inherent risks, exacerbating the eventual fallout.
Conclusion
As the trial of Bill Hwang and Patrick Halligan draws to a close, the jury is left to consider the extensive evidence presented by both sides. The outcome will not only determine the fate of the defendants but also set a precedent for how similar cases might be prosecuted in the future. The verdict will be closely watched by the financial community, given the unprecedented scale and impact of the alleged fraud.
