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Bill Hwang arrives in court for trial over collapse of his $36 billion
Archegos fund
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Item 1 of 3 Sung Kook (Bill) Hwang, the founder and head of a private
investment firm known as Archegos exits the Manhattan federal
courthouse in New York City, U.S., April 27, 2022.
REUTERS/Shannon/File Photo
**[1/3]** Sung Kook (Bill) Hwang, the founder and head of a private
investment firm known as Archegos exits the Manhattan federal
courthouse in New York City, U.S., April 27, 2022.
REUTERS/Shannon/File Photo Purchase Licensing
NEW YORK, May 8 (Reuters) - Sung Kook "Bill" Hwang arrived in court
Wednesday for the start of his criminal racketeering trial over the
collapse of Archegos Capital Management, facing charges that he and a
deputy broke the law in a massive stock scheme that unraveled in just
days in 2021.
Hwang appeared in a dark suit and purple tie in the Manhattan federal
courtroom for the first day of screening potential jurors.
The potential jurors were called into the judge's chambers one by one
for an initial round of questioning, which will focus on whether they
can sit for the expected eight weeks of trial.
Those who pass that hurdle will face more detailed questioning
regarding their suitability on Thursday before the final panel is
chosen.
The trial will delve into the implosion of Hwang's lightly regulated
family investment office, which prosecutors allege caused more than
$100 billion in shareholder losses at companies in its portfolio.
Federal prosecutors accuse Hwang of using derivatives to secretly
amass positions in multiple stocks that were so large they eclipsed
that of the companies' largest investors, driving up stock prices.
They also claim Hwang and former Archegos Chief Financial Officer
Patrick Halligan then lied about their holdings to sustain their
business relationship with global banks.
Hwang and Halligan
are charged with racketeering conspiracy
. Hwang faces an additional 10 counts of fraud and market
manipulation, and Halligan an additional two counts of fraud.
The two men have pleaded not guilty and are expected to argue
prosecutors are pushing a novel and nonsensical market manipulation
theory. Several attorneys
told Reuters
it may be a tough case for prosecutors.
Hwang's lawyers have described the case as the "most aggressive open
market manipulation case ever" brought by prosecutors.
Each count carries a maximum potential sentence of 20 years.
Archegos head trader William Tomita and Chief Risk Officer Scott
Becker have pleaded guilty to related charges and are expected to
testify at the trial.
Opening statements are expected on Monday before 12 jurors and four
alternates. The judge has said there are unlikely to be proceedings on
Fridays.
Archegos' March 2021 collapse stemmed from Hwang's use of financial
contracts known as total return swaps to take outsized stakes in his
favorite holdings without actually owning the stock.
Authorities have said Archegos borrowed aggressively to boost trading
capacity and at its peak had $36 billion in assets and $160 billion of
exposure to equities. Falling stock prices in March 2021 triggered
margin calls that Archegos was unable to meet.
That led some banks to dump stocks backing his swaps, causing big
losses for Archegos and its lenders,
such as Credit Suisse
, now part of UBS
(UBSG.S)
,
and Nomura Holdings (8604.T)
.
U.S. District Judge Alvin Hellerstein, who is overseeing the trial,
rejected Hwang and Halligan's motion to dismiss the case last year.
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Reporting by Jody Godoy; editing by Tom Hals and Michael Erman
Our Standards: The Thomson Reuters Trust Principles.
Brendan Pierson reports on product liability litigation and on all
areas of health care law. He can be reached at
brendan.pierson@thomsonreuters.com.
Jody Godoy reports on banking and securities law. Reach her at
jody.godoy@thomsonreuters.com
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