Bill Hwang, Billionaire Wall Street Investor, Arrested

Billionaire Bill Hwang was charged Wednesday with defrauding global investment banks and brokerages of billions of dollars by telling them lies to build his firm’s portfolio from $10 billion to $160 billion.

In a Manhattan federal court indictment, Bill Hwang, founder of Archegos Capital Management, and Patrick Halligan, his former CFO, were charged. Both were due in court later in the day. They face charges of racketeering and fraud.

He committed the scam from March 2020 to March 2021, investing first his fortune ($1.5 billion) and then investments borrowed from big banks and brokerages ($10 billion) to over $160 billion, the indictment claimed.

He masked his market prowess from investors by employing derivative instruments that were not required to be disclosed.

Thus, despite Archegos’s large positions, the investing public was unaware that Archegos had come to control the trading and stock ownership of many companies.

The hazardous moves exposed the firm’s portfolio to price changes in a few equities, triggering a cascade of margin calls in late March 2021. Nearly a dozen corporations, banks, and prime brokers misled by Archegos lost over $100 billion in value in days, the indictment alleged.

The schemes allegedly cost unsuspecting Archegos employees millions of dollars in delayed salary.

The SEC filed separate civil accusations against Bill Hwang and Halligan.

Archegos’ collapse last spring highlighted how one firm’s actions can have far-reaching ramifications for investors and market participants, said SEC Chair Gary Gensler.

According to the SEC’s Division of Enforcement Director, Gurbir S. Grewal, Bill Hwang and Archegos allegedly propped up a $36 billion house of cards by lying to banks for extra capacity and then using that capacity for further manipulative trading.

Archegos’ buying power was expended and stock prices plunged, purportedly leaving Archegos’ counterparties billions in trading losses.