Financier Bill Hwang liked to bet big on the markets. With the use of derivatives and risky investments, the assets of his investment firm, Archegos Capital Management, grew through the roof. Until things went south and losses snowballed into billions of dollars and threatened a financial crisis a year ago. Hwang, 58, not only saw his fortune evaporate in a few days, but has now been detained by federal agents accused of various crimes.
It is one of the most high-profile financial crime cases since the bankruptcy of Bernard Madoff’s investment firm. Along with Hwang, his number two at Archegos, Patrick Halligan, has been arrested. It is expected that this Wednesday they will appear before a court in Manhattan, in New York. Prosecutors have filed an 11-count indictment against Hwang and Halligan accusing them of, among other crimes, conspiracy, market manipulation, wire fraud and securities fraud. The alleged crimes artificially inflated the Archegos portfolio from 1,500 to 35,000 million dollars in one year, according to the Prosecutor’s Office.
Archegos borrowed multimillion-dollar sums from the big investment banks to invest on the stock market in a small group of American and Chinese securities. In addition, he took positions with derivatives that allowed him to multiply his bets. His signature went from being a discreet family office to a famous name on Wall Street. Archegos became Viacom’s largest institutional shareholder, its main bet, but when Viacom’s shares began to fall on the stock market a year ago, banks demanded more guarantees for their loans. Since Hwang could not provide them, he had to sell his shares, causing the price to fall further and aggravating the problem. The money was lost forever in this vicious circle, leaving multimillion-dollar losses to renowned firms and a good handful of unanswered questions.
Prosecutors accuse Hwang of misleading banks, but one question is how entities the size of Credit Suisse, UBS, Morgan Stanley, Goldman Sachs, Deutsche Bank, Wells Fargo and Nomura could lend so much money to a sign as Archegos. Some of them managed to manage the crisis and minimize losses, but the collapse of Archegos left a multi-million dollar hole for Nomura and, above all, for Credit Suisse, which admitted losses of more than 5,000 million euros. The Swiss bank cleaned up and dismissed those directly responsible for the risk assumed with Archegos.
He knows in depth all the sides of the coin.
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