NEW YORK — On Wednesday, the founder of Archegos Capital Management, a hedge fund, received an 18-year prison sentence for committing fraud related to securities and market manipulation, a scheme that prosecutors maintain led to significant losses for global investment banks totaling billions.
Bill Hwang learned the extent of his sentence in a Manhattan federal court where he expressed remorse about the downfall of Archegos, which occurred over three years ago. Though Judge Alvin K. Hellerstein concluded the prison term, he indicated that the sentencing hearing would continue the following day without finalizing all related matters.
The judge noted that the fraud likely resulted in losses exceeding $9 billion for as many as nine financial institutions. During Hwang’s trial in July, prosecutors attributed the fraudulent activities to Hwang and his associates, claiming they artificially inflated the values of nearly a dozen stocks prior to their sudden collapse in March 2021. This turmoil erased around $100 billion in market capitalization and effectively dismantled the firm.
After being accused, Hwang faced ten criminal charges, earning a conviction on six counts. He was acquitted, however, of one charge pertaining to market manipulation. Prosecutors contended that Hwang deceived various banks to procure billions to expand his New York-based firm, which saw its portfolio surge from $10 billion to an astonishing $160 billion.
As the trial began, Assistant U.S. Attorney Alexandra Rothman conveyed to jurors that Hwang was an established billionaire when he aimed to become a prominent figure on Wall Street. This ambition propelled him towards a complex scheme that involved trading stock derivatives to covertly accumulate enormous stakes in just a few companies.
The indictment highlighted that the public had no awareness of Archegos’s overwhelming influence over the trading and ownership of numerous companies, as it utilized securities that did not require public disclosures. For example, it was claimed that Hwang and his firm secretly controlled more than 50 percent of ViacomCBS’s shares.
Such high-risk strategies ultimately rendered the firm’s portfolio susceptible to significant price swings in a limited number of stocks. The subsequent margin calls experienced at the end of March 2021 resulted in the destruction of more than $100 billion in market value within a matter of days.
