The owner of a New York-based hedge fund that collapsed when it failed to comply with margin calls was arrested on Wednesday on charges of defrauding the world’s top investment banks and intermediaries of thousands millions of dollars telling them lies so that their private investment firm could increase its portfolio from 10,000 to 160 billion dollars.
The charges were revealed in a lawsuit in Manhattan federal court named Sung Kook “Bill” Hwang, the founder of Archegos Capital Management, and its former chief financial officer, Patrick Halligan. Both were expected to appear in court later. They face charges of conspiracy and fraud.
Hwang carried out the alleged fraud from March 2020 to March 2021 by initially investing his personal fortune, which grew from $ 1.5 billion to more than $ 35 billion, and later the investments he requested. on loan to major banks and brokers, which grew from about $ 10 billion to more than $ 160. billion, the prosecution said.
He hid the scope of his market ability from investors by using derivative securities that had no public disclosure requirements, he alleged.
“As a result, despite the size of Archegos’ positions, the investing public was unaware that Archegos had come to dominate the trading and ownership of shares of several companies, ”the indictment says.
The risky maneuvers made the company’s portfolio very vulnerable to price fluctuations in a handful of stocks, causing a flurry of margin calls in late March 2021 that had a destructive domino effect. More than $ 100 billion in market value disappeared in days for nearly a dozen companies, and the major banks and intermediaries cheated by Archegos lost billions, according to the indictment.
Millions in losses for employees
He said the schemes also caused millions of dollars in losses for innocent Archegos employees who had been forced to allocate a substantial amount of their salary to the company as deferred compensation.
The Stock Exchange Commission filed separate civil charges against Hwang and Halligan.
In a statement, SEC President Gary Gensler said: “The collapse of Archegos last spring showed how a company’s activities can have far-reaching implications for investors and market participants. “.
“We allege that Hwang and Archegos supported a $ 36 billion card castle by engaging in a steady cycle of manipulative trading, lying to banks for additional capacity and then using that ability to engage in even more manipulative trading.” , said Gurbir S. Grewal, director of the SEC’s Execution Division.
“But the house of cards could only be maintained if this cycle of deceptive bargaining, lies and purchasing power continued uninterrupted, and once Archegos’ purchasing power was exhausted and stock prices fell, the whole structure fell apart. collapse, allegedly leaving billions in trade losses to Archegos’ counterparts, “Grewal said.
Hwang’s lawyer, Lawrence Lustberg, said the lawyers were “extremely disappointed” with a prosecution they believe “has absolutely no factual or legal basis.”
“Such persecution, for open market transactions, is unprecedented and threatens all investors,” he said in a written statement. “As you will see when the facts unfold, Bill Hwang is completely innocent of any crime; there is no evidence that he has committed any crime, let alone the exaggerated accusations that permeate that accusation.”
Lustberg said it was also disappointing that Hwang was arrested without warning, although “he has made himself available and fully cooperated with the government’s investigation.”
“We vehemently discuss the charges as a matter of law and fact and trust that we will prevail in Court, but in no case was an arrest necessary in this case, in the midst of an investigation that has lasted more than a year. continues, “he wrote.
Attorney Mary Mulligan, who represents Halligan, said, “Pat Halligan is innocent and will be acquitted.”
- In:
- frau
- Stock and Securities Commission
Add Comment