Archegos founder Bill Hwang pleaded not guilty to a series of charges by U.S. authorities, including fraud and racketeering, after being arrested on Wednesday morning.
Federal prosecutors slapped Archegos Founder Bill Hwang with 11 charges including racketeering conspiracy, market manipulation, wire fraud and securities fraud, according to a statement from Manhattan U.S. Attorney Damian Williams.
Arrested alongside Hwang was Archegos chief financial officer Patrick Halligan who was issued three charges.
Hwang and Halligan both pleaded not guilty to all charges and were released on $100 million and $1 million bond, respectively.
«The Music Stopped»
According to federal prosecutors, Hwang used a type of leveraged equity swap to manipulate the price of seven Archegos’ portfolio companies with leverage reaching as high as 1,000 percent.
Prosecutors also underlined a loophole used that does not require family offices to report market exposure to regulators.
«In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio,» said Williams. «But last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.»
SEC Complaint
Separately, the U.S. Securities and Exchange Commission (SEC) also brought forward civil complaints on the same day, saying that Hwang and Archegos had «engaged in a brazen scheme to manipulate the market» and «propped up a $36 billion house of cards» through manipulative trading and dishonesty to obtain bank loans.
«Eventually, the weight of Defendants' fraudulent and manipulative scheme was too much for Archegos to bear, and over the course of less than a week in late March 2021, the house of cards collapsed,» the SEC said.
Guilty Plea
U.S. prosecutors also charged Archegos head trader William Tomita and chief risk officer Scott Becker for their alleged role in the scheme.
The two pleaded guilty and are cooperating with prosecutors, according to officials.
20 Years Per Charge
Hwang – alongside his former co-workers – will now stand in court one year following the infamous collapse of family office Archegos after amassing credit lines to make leveraged trades on seven stocks including Viacom, Discovery and Tencent Music Entertainment.
After their share price soared, a fire sale led to losses at global lenders including Credit Suisse, Nomura and Deutsche Bank.
If proven guilty, each of Hwang’s charges carries a maximum prison sentence of 20 years. Hwang and Halligan are scheduled to reappear in court on May 19.
