© Reuters. FILE PHOTO: Sung Kook (Bill) Hwang, the founder and head of a non-public funding agency often known as Archegos exits the Manhattan federal courthouse in New York City, U.S., April 27, 2022. REUTERS/Shannon Stapleton/File Photo
By Jonathan Stempel
NEW YORK (Reuters) – A federal choose on Tuesday rejected Bill Hwang’s bid to dismiss a U.S. Securities and Exchange Commission lawsuit accusing him of fraud that led to the March 2021 collapse of his $36 billion agency Archegos Capital Management.
U.S. District Judge Paul Oetken in Manhattan stated the SEC plausibly alleged that Hwang and Archegos, which can also be a defendant, deliberately hid the dangers they have been taking of their bid to illegally manipulate markets and artificially inflate the worth of their largest inventory holdings.
Oetken additionally dismissed some fraud-based claims towards Archegos’ former chief monetary officer Patrick Halligan, whereas letting the SEC pursue claims that Halligan aided and abetted fraud by former Archegos threat administration chief Scott Becker.
The choose additionally granted a Department of Justice request to place the SEC civil case on maintain whereas it pursues associated prison charges towards Hwang and Halligan.
Becker and William Tomita, who was Archegos’ head dealer, have pleaded responsible within the prison case. Hwang’s and Halligan’s trial is scheduled for Feb. 20, 2024.
Lawyers for Hwang and Archegos didn’t instantly reply to requests for remark. A lawyer for Halligan had no quick remark.
Archegos’ March 2021 collapse stemmed from Hwang’s use of complete return swaps, a kind of monetary contract, to attain what the SEC referred to as “dominant” positions in his prime 10 holdings, together with ViacomCBS (NASDAQ:) and Discovery (NASDAQ:).
Authorities stated Hwang borrowed aggressively to achieve further buying and selling capability, and ultimately had $160 billion of publicity to shares.
But when costs started falling, Hwang was unable to satisfy margin calls, main banks to dump shares backing his swaps.
This precipitated huge losses for Archegos and for banks resembling Credit Suisse, now a part of UBS, and Nomura Holdings (NYSE:).
Hwang was arrested in April 2022, and U.S. District Judge Alvin Hellerstein in Manhattan refused in March to dismiss his 11-count prison indictment.
In in search of a dismissal, Hwang argued that his buying and selling had been lawful, and prosecutors primarily entrapped him by inducing him to cooperate lengthy after deciding quietly that he was their goal.
The case is SEC v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-03402.