‘what happened here was fraud’


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Prosecutors on Monday urged a Manhattan jury to find Archegos founder Bill Hwang guilty of fraud and market manipulation, alleging that he “behaved as though the rules did not apply to him” by artificially inflating stock prices in a scheme that left banks with billions of dollars of losses.

The collapse of the family office in 2021, which briefly roiled Wall Street, “was not a freak accident”, assistant US attorney Andrew Thomas said, as closing arguments got under way after an eight-week trial.

Hwang deliberately deceived lenders and regular investors by disguising his large stakes in companies such as Viacom, Discovery and GSX, and was caught out when the market turned against him, Thomas added.

A lawyer for Hwang, Barry Berke, countered that the government had “worked backwards” in trying to build a criminal case after Archegos’ implosion, and had “been in search of a theory” as to how exactly Hwang stood to benefit from building large positions in a handful of shares.

“They have a pump without a dump,” Berke said of the prosecution’s claims. “Mr Hwang did not cash out a nickel.”

Hwang, 60, was relatively unknown beyond Wall Street before March 2021, when the rapid unwinding of Archegos’ positions — quietly built up with derivatives purchased through a plethora of big banks — were revealed to be behind a sudden sell-off in US equity markets.

The resulting losses to Archegos’s lenders — including Credit Suisse, Nomura, Morgan Stanley and UBS — totalled more than $10bn. 

Hwang faces 11 criminal charges including securities fraud and racketeering. He is being tried alongside former chief financial officer Patrick Halligan, who is charged with three counts including wire fraud.

Jurors are expected to begin their deliberations on Tuesday. If convicted, Hwang and Halligan could face years behind bars.

Over the course of the trial, jurors heard testimony from Archegos’ former head of risk Scott Becker and former head trader William Tomita, both of who have pleaded guilty to fraud charges.

Tomita told the jury that he had been ordered by Hwang to lie to banks about the concentrated positions within the fund’s portfolio, which had been amassed using equity swaps that obscure the buyer’s identity.

Transcripts of calls with big investment banks showed Archegos’ senior staff were “working together to actively mislead counterparties”, Thomas said, adding that the firm was built on a “culture of deception”.

“You have seen the Bloomberg [terminal] messages where Hwang directs his traders to move prices,” he added. “What happened here was fraud.”

“No one could see that Archegos was placing simultaneous orders at multiple brokers,” Thomas said, claiming that this was “a little bit like sending two different people to an auction to bid on the same [item]”.

Berke said the case had only been brought because “two, three adverse events” in March 2021 had led to a sell-off in some of Archegos’ holdings, prompting unexpected margin calls from the fund’s lenders.

Hwang “made a long-term commitment” to the stocks in question, Berke added, and the large stakes he built were “a reflection of his conviction”.

“He invested because he believed in those stocks,” he added.



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