Former head of Archegos fund found guilty of fraud

Former head of Archegos fund found guilty of fraud Keystone-SDA

Bill Hwang was found guilty in New York on Wednesday of fraud and market manipulation, in a case that shook the financial markets in 2021, especially Credit Suisse.

The jury in a Manhattan federal court upheld 10 of the 11 charges against the financier, according to several US media outlets. Theoretically, he faces up to 200 years in prison.

Archegos’ former CFO, Patrick Halligan, was found guilty on all three counts.

In the midst of the Covid-19 pandemic, Sunn Kook Hwang (real name) had, in the space of a few months, accumulated massive – and mostly concealed – positions in a number of companies.

At its peak, in March 2021, Archegos was exposed to $160 billion (approx. CHF144 billion) through derivatives, thanks to which Hwang’s company had multiplied its financial heft, but also the risks incurred.

His aim was to drive up the share prices of the few companies in which Archegos had invested, to the point of almost quadrupling the valuation of ViacomCBS (now Paramount Global) in just over four months.

At the same time, the South Korea-born American financier and three of his executives had concealed the size of their positions from the institutions that sold them these “swaps” or lent him money.

The fragile edifice collapsed when ViacomCBS announced a capital increase in March 2021, triggering a sharp sell-off on Wall Street.

This inflection triggered a domino effect, melting Archegos’ cash position at an accelerated pace and plunging the price of the shares held by the investment fund.

Around 100 billion dollars in market capitalisation was lost, hurting the other shareholders of these companies and the institutions that had done business with Archegos, mainly banks.

Credit Suisse heavily exposed

The hardest hit was Credit Suisse, which lost some $5.5 billion. All in all, the banks caught up in this whirlwind suffered losses of around $10 billion.

This event further weakened Credit Suisse, which came close to bankruptcy in March 2023 before being taken over by its Swiss rival UBS.

During the trial, the prosecution relied on two former Archegos executives who testified at the hearing, one of whom claimed that Hwang had instructed him to present a false picture of Archegos’ situation.

Lawyers for the main defendant sought unsuccessfully to discredit these testimonies, insisting that the financier had never sold his shares in order to profit from his operations.

Adapted from French by DeepL/ac

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