Hedge Fund Founder Sentenced for Massive Fraud

The founder of Archegos Capital Management, a hedge fund, was sentenced to 18 years in prison this week for securities and market manipulation fraud in a scheme that prosecutors said cost global investment banks billions of dollars. Bill Hwang, 60, was told the length of the prison term in Manhattan federal court on Wednesday after he told Judge Alvin K. Hellerstein that he felt "really terrible for what happened at Archegos," alluding to the fund's demise over three years ago, the AP reports.

• Hwang was convicted in July of 10 criminal counts, But he was acquitted of one charge of market manipulation while being convicted of six others. Prosecutors said Hwang lied to banks to get billions of dollars to grow his New York-based investment firm before its portfolio grew dramatically from $10 billion to $160 billion.

• At the start of Hwang's trial, Assistant US Attorney Alexandra Rothman told jurors that Hwang was already a billionaire when he sought "to be a legend on Wall Street" by engaging in a sophisticated scheme involving trades of stock derivatives to secretly build extraordinarily large positions in just a few companies.
• The collapse of the investment firm cost banks around $10 billion and wiped out most of Hwang's fortune, the New York Times reports.
• According to an indictment, the investment public did not know Archegos had come to dominate the trading and stock ownership of multiple companies because it used securities that had no public disclosure requirement. For instance, prosecutors said, Hwang and his firm once secretly controlled over 50% of the shares of ViacomCBS.
• The risky maneuvers, however, made the firm's portfolio vulnerable to price fluctuations in a handful of stocks. Margin calls in late March 2021 wiped out more than $100 billion in market value in just days, the indictment said.
• Prosecutors had sought a 21-year sentence. Hwang's lawyers called for no prison time, citing his charity work, his Christian faith, and the fact that his fortune had fallen from around $30 billion to $55 million, the BBC reports. The judge called the request for leniency "utterly ridiculous" in light of the huge amount of money involved in the fraud.

(More securities fraud stories.)