A billionaire Wall Street financier who notoriously lost tens of billions in a matter of days has returned to court for his successful fraud trial.
Sung Kook ‘Bill’ Hwang, 60, founder of Archegos Capital Management, is alleged to have caused more than $100 billion in losses to shareholders when his family office fund failed to meet margin requirements in March 2021. .
He was arrested in April 2022 and charged with fraud, extortion and conspiracy, as prosecutors say he carried out a scheme to defraud investors by lying about his company’s portfolio, which at one point exceeded $100 billion.
If convicted, he faces a maximum of 380 years behind bars, in what would amount to one of the biggest frauds in US history.
At the start of his trial this week, the court heard from a bank manager who testified about Archegos’ attempts to offload hundreds of millions of dollars in a liquidation sale as Hwang’s house of cards began to fall.
Sung Kook ‘Bill’ Hwang, founder of Archegos Capital Management, photographed arriving at Manhattan Criminal Court this week, where he faces charges of fraud, racketeering and conspiracy.
Hwang’s family office, Archegos Capital Management, once had more than $100 billion under management, before defaulting on its loans and losing billions to investors in March 2021.
The son of a Christian pastor, Hwang was born in Korea before immigrating to the U.S. in 1982. His early career was at Tiger Management, and after founding a spinoff fund, Tiger Asia Management, the firm was accused of insider trading. privileged.
Tiger Asia pleaded guilty to criminal wire fraud and agreed to pay $60 million, but Hwang settled without admitting guilt.
Hwang set up his family office in 2013 to manage hundreds of millions of dollars he made in his former hedge funds and reportedly caught the attention of regulators after he quickly amassed his wealth to more than $30 billion.
He was also known for flying under the radar, living modestly in New Jersey with his wife while leading Bible reading sessions with the local community and eschewing his multimillionaire status.
He made large investments in major companies, including Discovery Inc. and ViacomCBS Inc., and many of his holdings flew under the radar as family offices are not subject to the same regulatory scrutiny as regular hedge funds.
In addition to his allegedly fraudulent funds, Hwang also ran the Grace and Mercy Foundation for its philanthropic efforts to “support the poor and oppressed,” and as of late 2022 Bloomberg reported that he had $528 million in assets.
At the start of his trial this week, prosecutors attempted to exclude Hwang’s “previous good deeds” from evidence presented to the jury about his character.
Hwang, pictured in 2013 the same year he opened his family office, suffered huge losses in a matter of days in March 2021, leading several banks to lose billions.
Despite his billions, Hwang lay low and lived in a modest home in New Jersey (pictured) with his wife, where he was known for regularly holding Bible reading sessions with the neighborhood.
Hwang, pictured arriving in court Thursday, was once worth more than $30 billion, but prosecutors say he was able to hide much of his wealth because of a lack of regulation over family offices.
Patrick Halligan, Archegos’ former chief financial officer, also faces charges along with Hwang for his alleged role in the collapse.
With more than $100 billion in assets under management at its peak, Hwang’s company suffered a huge loss when Viacom CBS announced a $3 billion secondary stock offering in March 2021, triggering a 10 percent drop. percent in the share price.
In addition to new regulations introduced by the SEC at the time that hurt its holdings in China, Archegos suddenly faced a series of margin calls when its collateral fell too low.
According to prosecutors, Hwang made a desperate attempt to meet the demands by withdrawing cash and trading quickly to shore up the value of his holdings.
Jennifer Miranda, managing director of Jefferies Financial Group’s risk management group, testified Wednesday about a call she received in March 2021 from Archegos’ head of risk management, Scott Becker, while the fund was making these withdrawals.
She said Becker called her to urgently withdraw approximately $415 million and said “there seemed to be urgency in the call.”
‘What is the emergency? Because?’ she recalled her on the stand, reports Bloomberg.
While Miranda was confused at the time, she was allegedly called in as part of an urgent effort by Archegos to trade and move money to deal with a wave of margin calls from banks.
Within two days, Archegos failed to meet these margin requirements, leading to a staggering loss of more than $10 billion from its banking partners, including Jefferies, Morgan Stanley and Nomura Holdings Inc.
The fallout notably cost Credit Suisse more than $5.5 billion alone.
If convicted, Hwang (pictured with his family early in his career) faces a maximum of 380 years behind bars, in what would amount to one of the biggest frauds in US history.
Hwang created his family office in 2013 after making hundreds of millions at a former hedge fund and reportedly caught the attention of regulators after he quickly built his wealth to more than $30 billion.
Becker has already pleaded guilty in the case and is scheduled to testify next week about his role in the alleged scheme.
Miranda testified that despite the apparent rush to withdraw funds, Becker told him that the company did not have any money problems and at the time had about $7 billion.
Based on conversations with Becker, Miranda said his bank allowed Archegos to withdraw $240 million, not knowing that Archegos was struggling to make ends meet with other banks.
He said Jefferies took a $40 million hit when it was forced to liquidate its positions in Archegos.
This was reportedly presented by prosecutors to allege a pattern of lying to investors about Archegos’ financial security, which also included prior testimony from a former UBS risk manager.
In that case, former UBS head Bryan Fairbanks testified that Archegos was able to increase its exposure from $8 billion to $10 billion by claiming it had up to 40 percent of its capital in free cash on hand.
He said additional claims that Archegos could liquidate its investments in a matter of days “gave us some comfort.”
When margin requirements were not met and Archegos defaulted on its loans, UBS lost a total of $774 million.
In all, jurors are expected to hear testimony from 11 bank representatives who facilitated Archegos’ attempts to make the margin calls, which prosecutors say were critical to the plan to shore up the value of his company.
Because Archegos was a family office rather than a full-fledged hedge fund, it was not subject to the same levels of regulation and scrutiny as a hedge fund, which prosecutors say allowed Hwang to use performance swaps. .
By using yield swaps, Archegos was able to hide the true risk of its huge portfolio, while gaining huge credit exposure from banks that allowed it to carry out high-risk trades.
Despite being worth more than $30 billion at his peak, Hwang was not as well-known as other Wall Street whales with similar fortunes because of this tactic.
He was also known to not flaunt his fortune and lives in a modest home in New Jersey while regularly attending his local church.