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A New York jury has found former Wall Street trader Bill Hwang guilty of fraud and market manipulation, three years after the implosion of his fund Archegos sent tremors through global equity markets and left major banks nursing billions of dollars in losses.
The verdict on Wednesday came after an eight-week trial in which prosecutors sought to prove that Hwang lied to lenders and “deceived the market” with secretive trading strategies that allowed him to drive up the share price of a handful of media and technology groups, before a series of adverse events led to a sudden sell-off in March 2021.
Lawyers for Hwang, 60, claimed that he had “bought these stocks because he loved them” and accused the US government of having “no theory” as to how he would have stood to benefit from building outsized positions in specific companies.
Former Archegos chief financial officer Patrick Halligan, who was tried alongside Hwang, was also found guilty of racketeering and fraud. Both will be sentenced at a later date.
Hwang was found guilty of 10 out of 11 charges he faced, while Halligan was convicted on all three counts against him.
Relatively unknown outside financial districts in New York and Hong Kong, Hwang rose to international prominence in the spring of 2021, when his family office Archegos was revealed to be behind a fire sale of big stocks including Discovery, Viacom and Tencent.
The fund had managed to amass large stakes in specific companies by buying equity swaps, a method which at the time allowed the purchaser to conceal their identity.
“No participant in the market could track the trading back to a single buyer,” assistant US attorney Andrew Thomas said in closing arguments on Monday. “No one could see that Archegos was placing simultaneous orders at multiple brokers.”
Once banks that had lent to Hwang began to realise that Archegos’s portfolio consisted of outsized bets in a handful of companies, they demanded he deposit more funds into his accounts to cover the risk, and unwound their positions when he failed to pay up.
The ensuing sell-off left Archegos’s lenders — including Credit Suisse, Nomura, Morgan Stanley and UBS — with combined losses of more than $10bn, and prompted a revamp of due diligence processes at some of Wall Street’s biggest banks.
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