The collapse of Archegos Capital Management in spring 2021 sent shockwaves through Wall Street, resulting in billions in losses for major banks. A federal prosecutor in Manhattan recently told a jury that the firm’s founder, Bill Hwang, was responsible for this catastrophic event due to his “lies and manipulation.”
Andrew Thomas, the prosecutor, claimed that Hwang had defrauded banks and other traders by artificially inflating stock prices to boost the size of Archegos. However, Hwang’s lawyer, Barry Berke, argued that his client’s high-risk trading was not manipulative but based on his belief in certain companies.
Hwang, facing charges of securities fraud, wire fraud, conspiracy, racketeering, and market manipulation, risks spending the rest of his life in prison if convicted on all counts.
Archegos, initially a family office set up by Hwang in 2013, managed billions of dollars in investments, eventually amassing over $100 billion in stock control. Using sophisticated derivatives and borrowed funds, the firm expanded its stock positions, but a rapid decline in stock prices in March 2021 led to its downfall.
The courtroom during closing arguments was packed, with significant attention on the case. Testimonies from former Archegos employees and evidence of manipulated stock prices were key elements of the trial.
The trial highlighted the alleged misconduct by Hwang and his associates in misleading banks about Archegos’s market footprint and manipulating stock prices. Key witnesses, former employees of Archegos, provided crucial testimony supporting the prosecution’s case.
Despite attempts by Hwang’s legal team to discredit witnesses and offer alternative explanations, the prosecution maintained its stance that Hwang committed fraud through Archegos.
In his defense, Hwang’s lawyer emphasized the belief in their investments, highlighting that Archegos never cashed out on their positions. The trial shed light on Wall Street’s lending practices to hedge funds and family offices, raising concerns about the risks involved.
As the case nears its conclusion, the impact of Archegos’s collapse on the stock market remains limited, but the broader implications of the firm’s failure are significant.
The federal judge overseeing the trial is expected to provide instructions to the jury before they reach a verdict. Despite the complex nature of the case, moments of levity, such as Judge Hellerstein becoming a great-grandfather during the proceedings, offered some relief.
