Bill Hwang, the founder of Archegos Capital Management and Patrick Halligan, the CFO, were charged for alleged “manipulative trading” and “deceptive conduct” that led to a multibillion-dollar fraud. The criminal charges include racketeering conspiracy, securities fraud and wire fraud.
“We allege that these defendants and their co-conspirators lied to banks to obtain billions of dollars that they then used to inflate the stock price of a number of publicly-traded companies,” said Manhattan U.S. Attorney Damian Williams. “The lies fed the inflation, and the inflation led to more lies. Round and round it went.”
According to the indictment, stock prices of many companies were manipulated, employees’ savings were gambled, and different banks lost billions of dollars. For example, UBS lost $861 million. The case marks one of the highest-profile criminal white-collar prosecutions in years. The scheme swelled the firm’s portfolio from $1.5 billion to $35 billion in a single year and relied on extensive borrowing from Wall Street banks to finance big bets on a handful of stocks, including ViacomCBS, Discovery, and Chinese giants Tencent and Baidu. At its peak, Archegos had an exposure of $160 billion, the SEC alleges, putting it on par with some of the world’s biggest hedge funds.
Prosecutors also said that two former Archegos employees, William Tomita and Scott Becker, have pleaded guilty for their roles in the alleged conspiracy and are cooperating with authorities. Hwang and Halligan both pleaded not guilty to charges of racketeering conspiracy, securities fraud and wire fraud.
Hwang, a veteran investor, has come under SEC scrutiny before. In 2012, the regulator accused him and his former fund, Tiger Asia, with insider trading and market manipulation. Hwang and Tiger Asia later agreed to pay $44 million to settle the SEC charges. After the investigation, Hwang turned Tiger Asia into a family fund, Archegos.
Bond was set at $100 million for Hwang during a court appearance Wednesday. He also had to attest that he lost his passport and his wife had to surrender hers. Bond was set at $1 million for Halligan.
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