The multibillion-dollar fraud trial against Archegos founder Bill Hwang is coming to a close as prosecutors and defense lawyers presented their closing arguments. Hwang faces 11 charges, including securities fraud and racketeering.
According to the federal prosecutor, Andrew Thomas, the collapse of Archegos Capital Management in 2021 was due to Hwang’s deception and manipulation, leading to significant losses for Wall Street banks. Thomas accused Hwang of artificially inflating stock prices to boost Archegos‘ size, defrauding banks and other traders.
In response, Hwang’s lawyer, Barry Berke, argued that the government was unfairly targeting his client’s high-risk trading strategy solely because it resulted in losses for the banks that had lent him billions. Berke emphasized that Hwang’s investments were based on his belief in certain companies, not manipulative tactics.
Hwang, facing charges of wire fraud, conspiracy, racketeering, and market manipulation, could potentially face life imprisonment if convicted on all counts. The collapse of Archegos not only led to around $10 billion in losses for Wall Street banks but also wiped out a significant portion of Hwang’s personal wealth.
Archegos, initially established as a family office by Hwang in 2013, managed billions of dollars in the stock market through complex derivatives and borrowed funds from banks. However, the firm’s downfall came swiftly in March 2021 when stock prices plummeted, and banks demanded repayment, leading to its collapse.
The courtroom during the closing arguments was filled with supporters of Hwang, with U.S. Attorney Damian Williams also present for part of the proceedings at Manhattan federal court.The trial, commencing in early May, included testimonies from 21 witnesses for the prosecution. Evidence presented by prosecutors consisted of internal emails and text messages exchanged among Archegos employees, as well as recorded conversations between Archegos traders and employees of Wall Street banks that facilitated the firm’s trading activities with billions of dollars.
During his closing statement, Mr. Thomas highlighted key witness testimonies, text messages, and emails from Mr. Hwang, likening the abundance of text messages to leaving behind fingerprints at a crime scene. Mr. Hwang, also known as Sung Kook Hwang, did not testify in court, nor did his co-defendant Patrick Halligan, the former CFO of Archegos.
The prosecution alleged that Mr. Hwang and Mr. Halligan misled banks such as Credit Suisse, UBS, Morgan Stanley, and Goldman Sachs about Archegos‘ market presence. Mr. Thomas claimed that Mr. Hwang manipulated stock prices within the firm’s portfolio.
Accusations were made against Hwang for running Archegos deceitfully, with Halligan aiding him in the process. Former Archegos employees who cooperated with authorities served as crucial witnesses in the case.
Scott Becker, the former chief risk officer, admitted to deceiving banks about Archegos‘ holdings to secure further lending, although he stated that Hwang did not explicitly instruct him to lie. Timothy Haggerty, representing Mr. Halligan, argued that without Becker’s testimony, there was no substantial case against his client, emphasizing Becker’s admitted bias against Halligan.
William Tomita, a former top trader for Archegos and a key government witness, testified that Hwang directed him on disclosing the firm’s stock holdings and executing large buy orders to inflate stock prices. Tomita also mentioned that Wall Street banks used these inflated closing prices to determine borrowing limits for Archegos.Mr. Hwang’s legal team attempted to discredit the main witnesses through cross-examination and expert testimony that aimed to provide a more favorable explanation for Archegos‘ large stock purchases. They presented only two witnesses during the trial.
During his closing statement, Mr. Berke pointed out a flaw in the prosecution’s argument, highlighting that neither Mr. Hwang nor Archegos had cashed out their significant stock positions.
Although Archegos‘ collapse had limited effects on the overall stock market, it revealed the risks associated with Wall Street’s practice of providing substantial loans to hedge funds and large family offices.
Gary Gensler, the chair of the Securities and Exchange Commission, expressed concerns about the high levels of borrowing by hedge funds for trading activities during a recent discussion with reporters from The New York Times. However, he did not specifically mention Archegos or Mr. Hwang’s trial.
The presiding federal judge, Alvin K. Hellerstein, plans to provide the jury with legal instructions on Tuesday before they deliberate on the case.
While the lengthy trial delved into complex topics, there were some lighter moments. Judge Hellerstein, aged 90, interrupted a witness at one point to share the news of becoming a great-grandfather, which was met with applause from everyone present, including the lawyers and the jury.
Source: The New York Times
