Bill Hwang's Trial Begins Over Archegos Fund Collapse: What To Expect

Zinger Key Points
  • Bill Hwang faces racketeering, fraud charges in Archegos collapse trial.
  • Archegos used swaps for $160 billion exposure, couldn't meet margin calls.

The criminal racketeering trial of Bill Hwang, founder of Archegos Capital Management, began on Wednesday in New York. Hwang and his deputy face charges related to an alleged stock manipulation scheme that led to the fund’s dramatic collapse in 2021, according to Reuters.

What Happened: The trial began with screening potential jurors, who will undergo a series of questioning rounds to determine their suitability for the anticipated eight-week trial.

The trial will center on the implosion of Hwang’s family investment firm, which prosecutors claim led to shareholder losses exceeding $100 billion. The prosecution contends that Hwang covertly built up positions in several stocks using derivatives, driving up their prices, and then misrepresented these holdings to sustain relationships with international banks.

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Hwang and his deputy, Patrick Halligan, face charges of racketeering conspiracy. Hwang also faces 10 counts of fraud and market manipulation, while Halligan faces two counts of fraud. Both have pleaded not guilty and are expected to argue that the prosecutors’ market manipulation theory is novel and nonsensical, Reuters reported.

Archegos Capital Management’s downfall in March 2021 was linked to Hwang’s strategy of utilizing total return swaps to secure substantial positions in select stocks without direct ownership. The firm engaged in heavy borrowing, amassing $36 billion in assets and exposure to equity worth $160 billion.

Declines in stock values precipitated margin calls that Archegos failed to satisfy, resulting in major financial damage to both the fund and its creditors, such as Credit Suisse, which has since merged into UBS Group AG UBS.

Why It Matters: The collapse of Archegos Capital Management had a significant impact on the financial markets.

In May 2021, it was reported George Soros bought millions’ worth of stocks that had taken a hit due to the collapse. This investment by Soros signaled his confidence in the potential recovery of these affected stocks.

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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

Image created using artificial intelligence via Midjourney.

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Posted In: NewsTopicsLegalAI GeneratedArchegos Captial Managementbenzinga neuroBill HwangPatrick HalliganStock Manipulation
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