Hwang had started Tiger Asia a few years before, after Robertson was forced to close his firm following losses and client withdrawals. Hwang was already known as an aggressive investor, taking big, concentrated bets. For a while, he was one of the more successful cubs to come out of Robertson’s shop, but things started to change in 2008, when he got stuck in a short squeeze of Volkswagen AG. He ended the year down 23% and many investors pulled out, furious that an Asia-focused fund was gambling in European markets.

Then came Hwang’s legal troubles. In 2012, after years of investigations by authorities in the U.S. and Hong Kong, the U.S. Securities and Exchange Commission accused Tiger Asia of insider trading and manipulation in two Chinese bank stocks. The agency said Hwang’s firm “crossed the wall,” receiving confidential information about pending share offerings from the underwriting banks, and then used that knowledge to reap illicit profits. Hwang settled that case without admitting or denying wrongdoing, and Tiger Asia pleaded guilty to a Department of Justice charge of wire fraud. Hwang closed his firm and opened Archegos, his family office.

Li, who left Tiger Asia in 2011, opened Teng Yue, which means leap or soar, the same year, and by early 2012 he was managing $40 million. His anchor investor was East Rock Capital, a family office in New York. The firm has grown mostly through investment gains rather than aggressive money-raising, and his client base is heavily weighted toward family offices, endowments and foundations. Noteworthy investors also include Scott Shleifer, who heads the venture unit of Tiger Global, one of the most successful offshoots of Robertson’s empire, according to people familiar with the matter.

Erasing Gains
People who know Li describe him as quietly formal — more suit and tie than a fleece or half-zip sweater — and say his cool demeanor is such that you wouldn’t know on any given day if he was significantly up or down. He has told people it was painful to watch Hwang’s downfall and he had learned firsthand the dangers of hubris. 

That makes this year’s turn of events especially puzzling. Even some fans question his love affair with GSX. He started buying it in 2020, around the time that Block’s Muddy Waters Research and other activist short sellers started calling the company a fraud. In February of that year, Grizzly Research questioned GSX’s results. Then in April Citron Research accused the company of overstating revenue by as much as 70%. In early May, Scorpio VC concluded the financial data “is not up to the test.” Block estimated that at least 70% of its users were fake.

GSX said in its most recent annual report in April that it’s cooperating with an SEC inquiry into issues raised by short sellers. It noted that an independent internal review was mostly complete and hadn’t found any evidence that would significantly impact the company’s past financial statements.

Li told confidants that he spent more than $2 million researching the company and he insisted it was legit, according to people with knowledge of the conversations.

Still, Li and Hwang’s enthusiasm for GSX was largely invisible to the outside world because they had taken the positions using total-returns swaps that don’t usually need to be disclosed in quarterly regulatory filings. 

The SEC’s Gensler said the agency may change the rules to ensure hedge funds reveal such positions in the future.

The stock more than doubled in January, helping Li’s hedge fund gain 36% that month. On the back of a 70% gain in 2020, he was on a roll and renegotiated terms with clients, giving himself more leeway to lock up their capital, according to people with knowledge of the new policy. But as Hwang’s portfolio imploded in March, Teng Yue was forced to unwind some of its bets too. That fueled an almost 30% loss that month and erased all the profits the fund had made so far in 2021.