Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A New York jury has found former Wall Street trader Bill Hwang guilty of fraud and market manipulation, more than 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.
Hwang, 60, a devout Christian born in South Korea who was once one of the wealthiest evangelicals in America, was expressionless as the verdict was read out, and calmly shook his legal team’s hands when proceedings were over. He remains free on bail until sentencing on October 28. His lead attorney Barry Berke declined to say whether Hwang would appeal against the verdict.
US attorney Damian Williams, whose office in the Southern District of New York brought the case, said Hwang had “lied about Archegos’s positions in these companies and just about every other materially important metric investment banks would use in determining the firm’s creditworthiness”.
During the trial, Berke had argued that Hwang merely “bought these stocks because he loved them” and accused the US government of having “no theory” as to how his client would have stood to benefit from building outsized positions in specific companies.
Hwang was found guilty of 10 out of the 11 charges he faced. Former Archegos chief financial officer Patrick Halligan, who was tried alongside Hwang, was also found guilty on three counts, including racketeering and fraud. Jurors deliberated for about a day and a half before returning their decision.
Relatively unknown outside financial districts in New York and Hong Kong, Hwang worked at New York-based Tiger Management, founded by hedge fund pioneer Julian Robertson, from 1996 to 2001. He 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 from the wider market.
“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.
The trial also dredged up one of the most painful incidents in recent years for Wall Street banks and cast a light on what was at times threadbare analysis they did in relation to Archegos.
Over several months, bankers spoke to the team at Archegos to try to decipher what their positions were at other lenders — when in reality Hwang had amassed similar investments across Wall Street.
In one instance, prosecutors showed messages from March 2021 when UBS executives were celebrating projections of about $50mn in annual fees from Archegos. Just weeks later, the Swiss bank would lose more than $800mn due to its Archegos dealings.
