Posted on: December 20, 2024 09:30 PM

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Founder and head of archegos capital management bill Hwang sentenced to 18 years in prison for orchestrating massive market manipulation and fraud schemes

Edward Y. Kim, the Acting United States Attorney for the Southern District of New York, announced today that SUNG KOOK  HWANG, the founder and head of a private investment firm known as Archegos, was sentenced by U.S. District Judge Alvin K. Hellerstein to 18 years in prison concurrently on each count charged for leading a criminal enterprise that manipulated the prices of multiple stocks and defrauded at least nine investment banks. In July 2024, HWANG was convicted following a nine-week jury trial of racketeering conspiracy, securities fraud, market manipulation, and wire fraud.

Beginning in 2020, HWANG—along with his co-conspirators, including codefendant Patrick Halligan used the Archegos enterprise to pursue two interrelated criminal schemes, one involving manipulative trading in the marketplace and the other involving false and misleading statements to Archegos’s trading counterparties.  Although HWANG held himself out as an investor focused on company fundamentals with a three- to five-year investment horizon, which had been Archegos’s investment approach for years, by the fall of 2020, HWANG spent his time—and nearly all Archegos’s capital—on constant trading in the same core stocks.  HWANG began deploying strategies aimed to manipulate, control, and artificially affect the market for securities in Archegos’s portfolio.  Those techniques included purchasing or selling securities at particular times of day including marking the price of securities up at the close of trading to trigger payouts to Archegos and trading at times and in a manner to give the false impression of additional interest in the securities, transacting in certain securities in large amounts or high volume, and timing or coordinating certain transactions to maximize impact on the market.

HWANG’s manipulative trading was sustained and furthered by lies and misrepresentations made to Archegos’s counterparties.  As HWANG’s trading led to large position sizes, Archegos’s counterparties started to impose limits on Archegos’s trading.  To enable HWANG to continue to trade the same names at larger sizes, HWANG, Halligan, and others conspired to make repeated, materially false and misleading statements to Archegos’s counterparties about Archegos’s portfolio of securities.  These false and misleading statements were designed to fraudulently induce the counterparties into trading with and extending credit to Archegos, enabling and facilitating the market manipulation scheme, and to hide the true risk of doing business with Archegos.

By March 2021, HWANG’s manipulative trading scheme—which relied in part on continually increasing the size of Archegos’s positions in a handful of equities—had profoundly reshaped Archegos’s portfolio and risk profile. Now Archegos had concentrated its investments in a number of publicly traded stocks with markets that HWANG found he could distort, including of large companies, such as ViacomCBS and Discovery.  Archegos’s portfolio became highly vulnerable to external events that might deflate the artificial prices HWANG had created.  In late March 2021, the markets exposed HWANG’s price manipulation.  On March 22, 2021, ViacomCBS announced a seasoned equity offering.  Following that announcement, on March 23, 2021, HWANG directed nearly a billion dollars in additional purchases of stock in ViacomCBS and other companies whose stock HWANG had manipulated in a final effort to control the prices of those stocks and prevent them from declining and harming the value of his portfolio. On March 24, 2021, using what cash and trading capacity remained, HWANG made one final attempt to reverse market forces, but he failed. 

Ultimately, the market manipulation and fraud schemes, and the billions of dollars in losses that they caused, victimized a wide swath of market participants, including counterparties that engaged in loans and securities trading with Archegos based on lies and deceit, ordinary investors who purchased and sold the relevant securities at artificial prices, and securities issuers who made business decisions based on the artificial prices of their stocks.  The schemes also caused millions of dollars of losses to innocent Archegos employees who had been required to allocate to Archegos a substantial amount of their pay as deferred compensation.

From DOJ