A fraud trial has begun for Bill Hwang, the founder of Archegos Capital Management, a hedge fund that collapsed and caused leading global investment banks and brokerages to lose billions of dollars. Prosecutors accused Hwang and his former CFO, Patrick Halligan, of artificially inflating stock prices before the company’s meltdown, which wiped out over $100 billion in market value. The prosecution claims that Hwang lied to banks to obtain billions of dollars that his firm used to inflate stock prices and grow its portfolio from $10 billion to $160 billion.
Prosecutors described Hwang and Halligan as engaging in fraudulent activities, with Assistant U.S. Attorney Alexandra Rothman stating that they made fraud their business in an attempt to make Hwang a legend on Wall Street. Rothman alleged that Hwang inflated stock prices through secret trading in derivatives, creating a house of cards built on manipulation and lies. Hwang’s attorney, Barry Berke, argued in his opening statement that Hwang was not guilty and took risks in investing in companies he believed in, without misrepresenting information to banks.
Hwang, who was already a billionaire, allegedly began engaging in illegal trading methods as the pandemic hit in March 2020. He reportedly sold off previous market positions and built large positions in a few select securities, growing his business by tens of billions in less than a year. The indictment against Hwang and Halligan claimed that they led market participants to believe that stock prices were the result of natural forces, when in reality, they were manipulated. While Hwang and Halligan pleaded not guilty, the head trader and chief risk officer of Archegos have pleaded guilty and are cooperating with prosecutors.
Attorney Mary Mulligan, representing Hwang and Halligan, portrayed Hwang as an eccentric genius and Halligan as a bean counter not involved in the risky trading. Mulligan argued that financial institutions were blinded by money and competed to be part of Hwang’s business, despite his risky track record. The indictment revealed that Hwang initially invested his personal fortune, which grew significantly, and later borrowed funds from banks to expand the scheme. The use of derivative securities allowed Archegos to dominate trading and stock ownership without public disclosure requirements.
Hwang and his firm allegedly controlled over 50% of the shares of ViacomCBS at one point, but risky maneuvers led to margin calls in 2021, resulting in over $100 billion in market value being wiped out in days. Nearly a dozen companies and financial institutions suffered losses as a result of Archegos’ collapse. Hwang, based in Tenafly, New Jersey, has been free on $100 million bail, while Halligan, based in Syosset, was free on $1 million bail. The trial will continue to unravel the details of the fraud allegations against Hwang and Halligan.
