Trial of billionaire businessman accused in ‘pump and crack’ scheme to begin

Three years ago, a multibillion-dollar investment firm called Archigos Capital Management imploded with little warning, causing big losses for some Wall Street banks and leading to federal criminal charges against the firm’s founder, Bill Hwang.

On Wednesday, accused Hwang, 60, Mr 11 accounts of securities fraud, Charges of wire fraud, conspiracy, racketeering and market manipulation are set to go on trial in Manhattan federal court. If convicted, he could spend the rest of his life in prison.

Federal prosecutors are seeking convictions in a massive stock market manipulation case in which Mr. Hwang, whose legal name is Sung Kuk Hwang, is one of the biggest financial losers. Archikos is mainly Mr. Hwang managed the money for his family and some of his employees, and when the company collapsed in March 2021, most of his family’s wealth was wiped out. And Mr. Hwang is being investigated by former chief financial officer Patrick Halligan. Officer of the archikos.

Officials said Archigos used billions of dollars in loans from Wall Street banks to inflate the prices of the stocks it invested in. Rising stock prices encouraged other investors to buy, pushing prices even higher. At its peak, the strategy was Mr. That raised Hwang’s net worth to more than $35 billion, and the total value of Archigos’ holdings to more than $100 billion.

Damian Williams, US Attorney for the Southern District of New York in Manhattan, said in April 2022 that Mr. Hwang and Mr. When his office announced it would file charges against Mr. Halligan, he called Archecos’ plan to inflate the stock’s price “historic in scope.” .

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Mr. Hwang’s attorney, Barry Berg, declined to comment. But in a court hearing a few months ago, Mr. Berg said his client “never sold a nickel of his stock.”

Mr. “This is a case that should never have been brought,” said Mary Mulligan, Halligan’s attorney.

Archigos was little known before its collapse and was not subject to much regulatory oversight because it did not manage any money for outside investors. Nevertheless, it operated like a large hedge fund, given the amount of risk it took and its large borrowings from banks – mainly through the use of sophisticated derivative contracts.

The company prospered whenever the prices of the purchased shares continued to rise. But Mr. is named after the Greek word for leader or prince. Archigos, named by Hwang, could not handle the sudden downward move in the market. Wall Street banks seized the bonds, prompting the company to demand that more money be posted as collateral.

The impact of Archigos’ failure on the stock market was minimal, but many banks suffered losses. Credit Suisse, which UBS later took over, lost $5.5 billion. UBS itself lost about $861 million from lending to Archecos. Last summer, UPS agreed to pay nearly $400 million to regulators in the U.S. and Britain over Credit Suisse’s risk failures in the Archigos affair. Banks that lost money included Nomura and Morgan Stanley.

If found guilty on all counts, Mr. Hwang could, theoretically, be sentenced to 220 years in prison – 20 years is more realistic. By comparison, crypto tycoon Samuel Bankman-Fried, who faced a maximum of 110 years in prison for defrauding clients of $8 billion, was sentenced to 25 years in prison in March.

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The trial begins Wednesday with jury selection. Prosecutors want to call as witnesses two former Archigos employees who have pleaded guilty and agreed to cooperate with the investigation.

Federal authorities said a key element of the scheme involved Archigos officials misleading banks about the company’s overall footprint in the market. Mr. Officials also argued that Hwang had engaged in a “pump and brag scheme” – to significantly increase the company’s stock, Mr. A strategy designed to make Hwang appear “super rich”.

But by raising the price of shares owned by Archigos, Mr. Prosecutors have yet to explain how Hwang planned to profit. Even the federal judge presiding over the trial said Mr. Hwang’s strategy of buying more and more shares has fueled him, he said.

“What did he want? What did he want to achieve? Having a big shot. I think it’s possible, but I don’t know that was his intention,” Judge Alvin Hellerstein said at a hearing last year. “I can’t figure out his goal.”

Advocates Mr. Testimony about potential exit strategies for Hwang will be presented at the trial, the statement said.

A former hedge fund manager, Mr. This is the second time Hwang has been accused of violating federal security laws.

In 2012, he reached a civil settlement with the Securities and Exchange Commission and was fined in an insider trading investigation involving his old hedge fund Tiger Asia Management. $44 million. Mr. Hwang was not charged, but Tiger Asia was Pleaded guilty to federal insider-trading charges In a related action brought by federal prosecutors in New Jersey.

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In settling with securities regulators, Mr. Hwang was banned from managing public money for at least five years. formal regulators Ban lifted in 2020. But instead of managing money for outside investors, Mr. Hwang focused on managing money for himself and his family.

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