Archegos Capital Management founder Bill Hwang should serve 21 years behind bars for fraud and market manipulation that led to his firm’s massive 2021 collapse, prosecutors recommended ahead of his sentencing next week.
Hwang, 60, deserves a lengthy prison term because he led one of the largest securities fraud schemes in history and caused billions of dollars in losses, prosecutors said in a Friday filing to US District Judge Alvin Hellerstein, who will sentence the Archegos founder on Nov 20.
“A significant sentence will be required to deter Hwang — a recidivist and unrepentant fraudster — and to signal to even the most hubristic investors that their grand schemes will be met with serious sentences,” prosecutors told the judge.
Hwang was found guilty in July of misleading leading Wall Street banks into helping him inflate the value of Archegos’ highly concentrated portfolio to as high as US$36 billion ($48.37 billion) before the bubble burst. Archegos counterparties lost some US$10 billion, and the scandal was a major factor in the later demise of Credit Suisse Group.
The offenses of which Hwang was convicted each carry a maximum sentence of 20 years in prison.
His lawyers last week asked that Hwang be given no prison time at all, saying prosecutors failed to show that Archegos’ trading activity caused losses separate from other independent factors. They also contended that no incarceration is appropriate based on their client’s age, health and personal history, noting that he suffers from cardiovascular disease.
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More than a 100 people, including a former UBS Group vice chair, other Wall Street figures and an ex-NFL linebacker, also submitted letters urging leniency for Hwang, many of them fellow devout Christians who cited his generosity, modest lifestyle and efforts on behalf of the church. That side of Hwang’s life, which revolves around his Grace and Mercy Foundation, was largely kept out of the trial at prosecutors’ request.
Former Archegos CFO Patrick Halligan was convicted alongside Hwang but will be separately sentenced in January.
Wall Street closely followed the two men’s two-month trial and its revelations about what happened at Archegos, which was Hwang’s family office. The firm bought swaps in a relatively small number of companies, most notably ViacomCBS, which the government said was part of a scheme to manipulate those fairly illiquid stocks. The firm told banks that it was investing in large-cap tech giants like Apple and Amazon.com but in reality poured any additional money that it raised into the same positions.
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Archegos imploded in March 2021 after a downturn in Viacom shares became a sell-off, prompting massive margin calls that the firm couldn’t meet.
Former Archegos head trader William Tomita and risk head Scott Becker testified against Hwang and Halligan at trial, saying they were directed to lie to banks. Both men previously pleaded guilty to fraud and cooperated with prosecutors in hopes of receiving leniency for their crimes.
Hwang’s defense team argued at trial that he truly believed in the companies in which Archegos was invested and said his trading was part of a long-term strategy. They had planned to point the finger back at the banks, saying they were sophisticated financial players who took their own risks, but Hellerstein blocked Hwang’s lawyers from employing a “blame the victim” defense.
“Hwang accepts no responsibility for what he did, so the court should have no confidence that Hwang has learned any lesson from this episode that would prevent him from returning to the markets,” prosecutors said in Friday’s filing.
The massive losses suffered by the banks raised serious questions about how they assessed the risks of taking on and extending credit to trading clients like Hwang and Archegos, neither of whom was well-known on Wall Street.
The case is US v. Hwang, 22-cr-240, US District Court, Southern District of New York (Manhattan).
