Investing.com – Sung Kook “Bill” Hwang, the founder of Archegos Capital Management, was found guilty by a jury in Manhattan federal court on Wednesday on charges of market manipulation tied to the 2021 collapse of his $36 billion private investment firm.
The trial, which began in May, had accused Hwang and his Archegos deputy, Patrick Halligan, of lying to banks to secure billions of dollars, which were then used to artificially inflate the stock prices of several publicly traded companies.
The collapse of Archegos sent shockwaves across Wall Street and drew regulatory scrutiny globally. Hwang, 60, had pleaded not guilty to one count of racketeering conspiracy, three counts of fraud, and seven counts of market manipulation. However, he was convicted on 10 of the 11 counts.
Halligan, 47, the former chief financial officer at Archegos, had pleaded not guilty to one count of racketeering conspiracy and two counts of fraud. He was found guilty on all counts he faced.
Both now face a maximum sentence of 20 years in prison for each charge for which they were convicted, although the actual sentence is likely to be much lower, based on a range of factors.
The U.S. Justice Department, when bringing the charges in 2022, highlighted the case as an example of its commitment to holding accountable those who defraud U.S. financial markets.
The trial focused on the implosion of Archegos, which caused $10 billion in losses at global banks and over $100 billion in shareholder losses in its portfolio companies. The prosecution claimed that Hwang’s actions significantly harmed U.S. financial markets, banks, market participants, and Archegos employees.
The prosecution accused Hwang of secretly amassing outsized stakes in multiple companies without actually owning their stock and lying about the size of Archegos’ derivative positions to borrow billions of dollars to artificially inflate the underlying stocks.
In response to the charges, Hwang’s defense team argued that the indictment criminalized aggressive but legal trading methods.
The case was brought by the U.S. Attorney’s Office for the Southern District of New York, which stated that Hwang’s positions drove up stock prices, with Archegos having $36 billion in assets and $160 billion of exposure to equities at its peak.
When stock prices fell in March 2021, and Archegos could not make additional deposits, banks sold the stocks backing Hwang’s swaps, erasing an alleged $100 billion in value for shareholders and billions at the banks, including $5.5 billion for Credit Suisse (SIX:), now part of UBS Group (NYSE:), and $2.9 billion for Nomura Holdings Inc (NYSE:).
