Archegos Capital Management founder Bill Hwang and Chief Financial Officer Patrick Halligan were charged with fraud, in the latest fallout from the spectacular collapse of the family office.

Federal prosecutors said Hwang used Archegos as an “instrument of market manipulation and fraud,” inflating its portfolio from $1.5 billion to $35 billion before it imploded and caused massive losses for banks, financial market investors and its own employees.

Hwang was arrested early Wednesday and was expected to appear in Manhattan federal court later in the day. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission filed related civil complaints as well.

Hwang and Halligan were charged with 11 criminal counts, including racketeering conspiracy, market manipulation, wire fraud and securities fraud, according to a statement from Manhattan U.S. Attorney Damian Williams.

“Bill Hwang is entirely innocent of any wrongdoing,” his lawyer Lawrence Lustberg said in a statement. “There is no evidence whatsoever that he committed any kind of crime, let alone the overblown allegations that pervade this indictment.” Lustberg said Hwang had been cooperative with investigations into Archegos.

The CFO’s lawyer, Mary Mulligan, said in a statement, “Pat Halligan is innocent and will be exonerated.”

Deceptive Trading
The indictment unsealed Wednesday said Archegos’s market positions ballooned to $160 billion at one point through a deceptive trading tactic that hid their true size from the market. The positions were inflated with the use of borrowed money and derivative securities that required no public reporting. When the market turned against the positions in March 2021, Hwang directed the fund’s traders to go on a buying spree in an attempt to prop up their price, federal prosecutors charged.

Get caught up on the Archegos story: The Man Who Lost $20 Billion in Two Days Is Lying Low in New Jersey

Archegos, Hwang’s family office, imploded after amassing a concentrated portfolio of stocks by using borrowed money. It collapsed after some of the shares tumbled, triggering margin calls from banks, which then dumped Hwang’s holdings. Banks lost more than $10 billion, prompting the departures of several senior executives and probes into the way firms monitor the risks run by their businesses serving hedge funds.

Fortunes diverged among the firms that Archegos dealt with: Credit Suisse Group AG, Nomura Holdings Inc. and Morgan Stanley incurred some of the steepest losses. Others, including Goldman Sachs Group Inc., Wells Fargo & Co. and Deutsche Bank AG, escaped relatively unscathed.

First « 1 2 3 » Next