Home Hedge Funds Archegos founder Bill Hwang heads to trial over collapse of $36bn fund...

Archegos founder Bill Hwang heads to trial over collapse of $36bn fund | Business


Sung Kook “Bill” Hwang arrived in court on Wednesday for the start of his criminal racketeering trial over the collapse of Archegos Capital Management, facing charges that he and a deputy broke the law in a stock scheme that unraveled in just days in 2021.

Hwang appeared in a dark suit and purple tie in the Manhattan federal courtroom for the first day of screening potential jurors.

The potential jurors were called into the judge’s chambers one by one for an initial round of questioning, which will focus on whether they can sit for the expected eight weeks of trial.

Those who pass that hurdle will face more detailed questioning regarding their suitability on Thursday before the final panel is chosen.

The trial will delve into the implosion of Hwang’s lightly regulated family investment office, which prosecutors allege caused more than $100bn in shareholder losses at companies in its portfolio.

Federal prosecutors accuse Hwang of using derivatives to secretly amass positions in multiple stocks that were so large they eclipsed that of the companies’ largest investors, driving up stock prices.

They also claim Hwang and the former Archegos chief financial officer Patrick Halligan then lied about their holdings to sustain their business relationship with global banks.

Hwang and Halligan are charged with racketeering conspiracy. Hwang faces an additional 10 counts of fraud and market manipulation, and Halligan an additional two counts of fraud.

The two men have pleaded not guilty and are expected to argue prosecutors are pushing a novel and nonsensical market manipulation theory. Several attorneys told Reuters it may be a tough case for prosecutors.

Hwang’s lawyers have described the case as the “most aggressive open-market manipulation case ever” brought by prosecutors.

Each count carries a maximum potential sentence of 20 years.

Archegos’s head trader, William Tomita, and its chief risk officer, Scott Becker, have pleaded guilty to related charges and are expected to testify at the trial.

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Opening statements are expected on Monday before 12 jurors and four alternates. The judge has said there are unlikely to be proceedings on Fridays.

Archegos’s March 2021 collapse stemmed from Hwang’s use of financial contracts known as total return swaps to take outsized stakes in his favorite holdings without actually owning the stock.

Authorities have said Archegos borrowed aggressively to boost trading capacity and at its peak had $36bn in assets and $160bn of exposure to equities. Falling stock prices in March 2021 triggered margin calls that Archegos was unable to meet.

That led some banks to dump stocks backing his swaps, causing big losses for Archegos and its lenders, such as Credit Suisse, now part of UBS, and Nomura Holdings.

US district judge Alvin Hellerstein, who is overseeing the trial, rejected Hwang and Halligan’s motion to dismiss the case last year.

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