A federal jury in Manhattan has found Sung Kook "Bill" Hwang, founder of Archegos Capital Management, guilty of fraud and market manipulation in connection with the spectacular collapse of his $36 billion investment firm in 2021. The verdict, delivered after a day and a half of deliberations, marks the culmination of a closely watched trial that sent shockwaves through Wall Street.

Jury Finds Hwang Guilty of Market Manipulation in Archegos Collapse

Hwang was convicted on 10 out of 11 criminal counts, including racketeering conspiracy, fraud, and market manipulation. His co-defendant, Patrick Halligan, who served as Archegos' chief financial officer, was found guilty on all three counts he faced.

Prosecutors alleged that Hwang and Halligan orchestrated a scheme to deceive banks and artificially inflate stock prices, leading to Archegos' implosion and billions in losses for global financial institutions and shareholders.

According to the US attorney Damian Williams, this verdict sends a clear message that those “who think they can cheat the system” will be held accountable. The defendants' actions not only harmed banks and market participants, but also ordinary investors and Archegos employees.

Potential 20 Years Behind Bars

During the trial, which began in May, the prosecution presented evidence that Hwang secretly amassed enormous positions in various companies through complex derivative instruments, while misrepresenting the true extent of Archegos' exposure to lenders. When stock prices began to fall in March 2021, the firm was unable to meet margin calls, triggering a cascade of forced liquidations that wiped out an estimated $100 billion in shareholder value.

Defense attorneys argued that Hwang's trading strategies, while aggressive, were legal and that prosecutors had overreached in their charges. However, the jury was ultimately convinced by the government's case, which included testimony from former Archegos executives who had previously pleaded guilty to related charges.

US District Judge Alvin Hellerstein has set sentencing for October 28. Both Hwang and Halligan face potential maximum sentences of 20 years in prison for each count, although actual sentences are likely to be lower based on various factors.

Archegos CEO Bill Hwang found guilty. His fraud caused losses of ~$10B. The avg American earns ~$1.7M in his entire life. What sentence could possibly be appropriate for a crime that destroys more wealth than 5,882 people will make in their entire lives? pic.twitter.com/yAXjhoW9Yj

— Nobody Special (@JG_Nuke) July 10, 2024

The conviction marks a second fall from grace for Hwang, who previously faced regulatory issues with his hedge fund, Tiger Asia Management, in 2012. That case resulted in Hwang pleading guilty to wire fraud and paying $44 million to settle insider trading charges.

Negative Impact on the Broader Market

The collapse of Archegos resulted in significant losses for several major banks, including Credit Suisse and Nomura Holdings, which reported losses of $5.5 billion and $2.9 billion, respectively. According to analysts, the losses incurred by the Swiss bank due to the collapse of the investment firm were one of several major factors ultimately leading to the eventual bankruptcy of Credit Suisse, which UBS ultimately took over.

In addition, Morgan Stanley experienced around $911 million in losses from its exposure to Archegos, though it managed to absorb the impact without severe long-term consequences. At the same time, UBS suffered losses of about $861 million related to Archegos, prompting a review of its risk management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term strategies.