Nupur Anand
NEW YORK (Reuters) – Sung Kook “Bill” Hwang, the founder of the $36 billion private equity firm Archegos Capital Management that collapsed in 2021, arrived in court on Wednesday for the start of his criminal trial.
Here’s a graph of the fund’s collapse – one of the biggest in recent years – which left global banks with $10 billion in losses:
1996-2001: Hwang, who moved to the United States as a child from South Korea, works for the late billionaire Julian Robertson’s pioneering hedge fund Tiger Management, where he hones his stock-picking skills.
2001: Hwang launches his own hedge fund, Tiger Asia Management. The firm was founded with Robertson’s seed money, making him part of an elite group of billionaire protégés dubbed the Tiger Cubs.
2012: Regulatory issues in Hong Kong and the US lead to the closure of Tiger Asia Management in 2012. Hwang pleads guilty to wire fraud related to illegal trading of Chinese bank stocks and separately pays US authorities $44 million to settle insider trading charges.
2013: Hwang turns Tiger Asia into a family office, renaming it Archegos Capital Management in early 2013.
March 2020: Working from his Manhattan apartment as COVID-19 grips New York, Hwang begins amassing huge positions in several securities, including media company ViacomCBS (NASDAQ:), using derivatives he trades with Wall banks -straight. The deals allow Hwang to accumulate leveraged positions in stocks without owning them or disclosing his stakes.
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March 2021: ViacomCBS announces a stock sale, causing its stock price to plummet, alarming Archegos banks. Banks are calling on the fund to provide additional collateral to cover the increased risk on swaps. But Archegos doesn’t have enough liquidity to meet the demands.
This is leading some banks to dump shares backing its swaps, leading to big losses for Archegos and its lenders such as Credit Suisse, which is now part of UBS, and Nomura Holdings (New York Stock Exchange:).
When banks begin reporting losses, regulators, including the SEC, begin to investigate the fund’s collapse.
April 2022: Federal prosecutors charge Hwang with 11 felonies and former Archegos CFO Patrick Halligan with three felonies.
Authorities allege Hwang and Halligan lied to banks to increase Archegos’ credit lines and used borrowed money to manipulate stock prices.
Hwang faces charges of racketeering, securities fraud, counterparty securities fraud and wire fraud, as well as seven counts of market manipulation. Halligan is charged with racketeering, wire fraud and securities fraud.
Both plead not guilty and are free on bail.
Hwang’s lawyers did not immediately respond to a request for comment.
May 2024: Hwang and Halligan’s trial begins. They are expected to argue that prosecutors are going overboard by pushing a new theory of market manipulation.
Hwang and Archegos argue that the SEC failed to prove how the New York firm traded fraudulently or how its swaps, which they say are legal, affected prices.
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