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BILL HWANG SENTENCED TO 18 YEARS IN PRISON IN ARCHEGOS CASE

By Bob Van Voris, Chris Dolmetsch, and Ava Benny-Morrison
November 20, 2024 at 3:20PM EST

Bill Hwang arrives at federal court in New York, US, on Nov. 20. Photographer:
Yuki Iwamura/Bloomberg (Yuki Iwamura/Photographer: Yuki Iwamura/Bloom)

(Bloomberg) -- Archegos Capital Management founder Bill Hwang was ordered to
spend 18 years in prison for fraud and market manipulation tied to the stunning
2021 collapse of his $36 billion family office, capping a case that riveted Wall
Street.

Hwang, 60, was sentenced Wednesday by US District Judge Alvin Hellerstein in New
York. The prison term was slightly lower than the 21 years prosecutors had
sought. Hwang’s lawyers had initially asked that he be given no prison time at
all.

“The amount of losses that were caused by your conduct are larger than any
amount of losses I’ve dealt with as a judge,” Hellerstein said. Hwang had no
visible reaction to the sentence, though he soon after briefly turned and smiled
at his wife, Becky, who was sitting in the courtroom gallery.

Hwang was found guilty in July of orchestrating a scheme to mislead his bank
counterparties into providing Archegos with billions of dollars in trading
capacity that inflated the value of his portfolio until the bubble burst in
March 2021. The implosion contributed to the demise of one of the biggest names
in finance, Credit Suisse Group AG, and caused significant losses at Morgan
Stanley, UBS Group AG, Nomura Holdings and other banks.

Hellerstein signaled throughout Wednesday’s hearing that he intended to impose a
tough sentence on Hwang. The judge called his request for no jail “utterly
ridiculous” in light of the money involved and compared Hwang to FTX founder Sam
Bankman-Fried, who received a 25-year sentence for fraud.



“What was worse? Mr. Bankman-Fried’s fraud or Mr. Hwang’s fraud?” the judge
asked.

In the course of the hearing, Hwang’s lawyer Dani James backed down from asking
for no jail and suggested a sentence of between four and five years. She
stressed his charitable work and humble lifestyle, noting that he still lives in
a modest New Jersey home. But the judge expressed skepticism about Hwang’s claim
of modesty, noting his “new apartment in Hudson Yards.”

Hwang himself spoke only briefly, saying he felt “deep pain” about what happened
at Archegos. After thanking his wife and supporters who wrote letters seeking
leniency, he asked the judge to impose a sentence that would allow him to
continue to serve society.

Prosecutor Andrew Thomas argued for a stiff sentence partly on the grounds that
Hwang was a repeat offender, noting his previous hedge fund, Tiger Asia, pleaded
guilty to insider trading in 2012. Hellerstein said he would consider that in
his sentencing and also rejected Hwang’s claims that his actions at Archegos
didn’t clearly contribute to the banks’ losses.

Wall Street Victims

That the victims were mainly Wall Street banks set Archegos apart from most big
white collar cases. Hwang’s lawyers had planned to argue at trial that the banks
were sophisticated players that understood the risks of trading with Archegos
but took them in order to earn lucrative fees. Hellerstein largely sided with
prosecutors in barring a “blame the victim” defense, which may be a major issue
in the planned appeal of his conviction.

The jury found that Hwang directed Archegos staff to tell banks that the firm
had large positions in tech giants like Apple Inc. and Microsoft Corp. In
reality, its money was heavily concentrated in a small group of fairly illiquid
stocks, most notably the company then known as ViacomCBS, that his trading could
move. To maximize his trades’ impact, Hwang typically bought swaps, knowing that
his counterparty banks would hedge by directly buying shares. 

Archegos fell into a fatal spiral after a March 2021 selloff in Viacom shares
prompted billions of dollars in margin calls.

The Archegos indictment was the first big white-collar case brought by Manhattan
US Attorney Damian Williams after his 2021 appointment by President Joe Biden.
Along with the Bankman-Fried prosecution, it was touted as a sign of a more
aggressive approach to policing financial crimes. President-elect Donald Trump
has said he intends to nominate former Securities and Exchange Commission Chair
Jay Clayton as Williams’ successor.

Hellerstein on Wednesday put off dealing with the issue of how much Hwang must
pay in restitution to his victims. Prosecutors said banks had submitted claims
for more than $9 billion, though Hellerstein said there were discrepancies with
figures that had been put forth earlier that needed to be addressed. 

Hwang’s lawyers have argued that restitution is unjustified as well as futile,
since the former billionaire now only has a net worth of around $55 million.



‘False Picture’

At trial, the defense did manage to occasionally highlight the banks’ profit
motives in their dealings with Archegos. Goldman Sachs Group Inc. product
specialist Nastassia Locasto testified at trial that her bank initially had
questions about Archegos’ holdings but ultimately decided to trade with Hwang’s
family office because it knew its Wall Street rivals were making millions in
fees. “They were paying our peers,” she said.

But such testimony was overshadowed by that of two former Archegos executives
who previously pleaded guilty and agreed to cooperate with the government.
Former head trader William Tomita and risk head Scott Becker both said they were
directed to lie to banks to persuade them to extend more credit to Archegos.

Tomita also vividly described how Hwang manipulated markets by directing his
team to try to reach price targets that often changed minute by minute. Archegos
used “very aggressive” algorithmic trading techniques to ensure it accounted for
a very large percentage of the trading volume for the firm’s portfolio stocks,
Tomita said. 

When Goldman’s Locasto questioned him about why the main holders of one of
Archegos’ portfolio stocks were other banks, Tomita said he lied.

“I painted this picture — this false picture — that other hedge funds were using
the capacity and it wasn’t us,” he said.

Goldman was one of the few Archegos counterparties that emerged relatively
unscathed, and it was revealed at trial that the bank benefited from a huge
mistake Archegos made in its frantic final days. Tasked with withdrawing $470
million from its Goldman trading account, an Archegos employee actually wired
that amount instead.

On Wednesday, prosecutors noted that Goldman was the sole bank out of a group of
nine that wasn’t seeking restitution in the case, though it said it suffered
some losses in the form of legal fees.

Former Archegos Chief Financial Officer Patrick Halligan was convicted alongside
Hwang but will be sentenced separately in January.

The case is US v. Hwang, 22-cr-240, US District Court, Southern District of New
York (Manhattan).

(Updates with restitution discussion, background.)

©2024 Bloomberg L.P.




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