Archegos founder Bill Hwang sentenced to 18 years in prison for massive fraud

NEW YORK – A US federal judge sentenced Bill Hwang, founder of Archegos Capital Management, on Nov 20 to 18 years in prison for his role in the collapse of his once giant investment firm that caused roughly US$10 billion (S$13.4 billion) in losses for Wall Street banks.

Hwang, whose legal name is Hwang Sung Kook, was convicted in July by a federal jury in Manhattan after nearly two days of deliberation following a two-month trial.

Federal prosecutors called 21 witnesses, including two former employees of Archegos, which Hwang had set up in 2013 as a giant family office.

Archegos traded like a hedge fund for much of its existence, using borrowed money from Wall Street banks to make big bets on stocks. However, as it was a family office that managed mainly Hwang’s family money, it operated without much regulatory oversight.

The sudden collapse in 2021 of Archegos – which managed US$36 billion of Hwang’s family money – wiped out most of his personal fortune, in addition to causing the steep losses for the banks that had facilitated his firm’s trading.

The effect of Archegos’ failure on the broader stock market was limited. But several banks, including UBS, Morgan Stanley and Nomura, suffered losses.

In all, Hwang, 60, was charged with 11 counts of securities fraud, wire fraud, conspiracy, racketeering and market manipulation.

The jury found him guilty on 10 of those charges and found him not guilty on one of the seven counts of market manipulation.

The sentencing hearing took nearly four hours, as Hwang’s lawyers objected to many of the provisions in the so-called pre-sentencing report prepared by the prosecution.

Judge Alvin Hellerstein, who presided over the trial, rejected most of the objections. He said he had to balance the severity of the crime with Hwang’s charitable work.

“I have to take into consideration the good and the bad,” said Judge Hellerstein, who also sentenced him to three years of supervised release. “The sentence has to reflect the seriousness of the event.”

The sentence was a relatively stiff one. The judge noted that Sam Bankman-Fried received a 25-year sentence for his role in the US$8 billion fraud that collapsed his cryptocurrency exchange, FTX.

Hwang is planning to appeal against his conviction. But in addressing the judge, he said he was sorry for the pain he had caused his staff and the banks that had lent money to his firm.

“I feel really terrible for what happened,” he added.

Hwang, who often came to his trial with religious texts, thanked God, his wife, family and friends. He said he was “deeply blessed”.

Before Hwang spoke, a prosecutor told Judge Hellerstein that Hwang’s fraud was “pervasive and not a one-off”.

He also called him a recidivist because he had reached a civil settlement with the Securities and Exchange Commission in an insider trading investigation that involved his old hedge fund – Tiger Asia Management – and had been fined US$44 million.

Federal prosecutors asked for Hwang to be sentenced to 21 years in prison because of the severity of the crime.

Hwang’s lawyers argued that he should not get any prison time. They said he was one of the biggest victims in the collapse of Archegos.

Judge Hellerstein noted during the hearing that the losses at Archegos constituted one of the bigger frauds on Wall Street.

He said Hwang, who also ran a religious-oriented foundation, was clearly “a charitable man”. But he added that it raised the question of how a man who could do a lifetime of good work could also commit a “dreadful crime”.

The judge said the request by Hwang’s lawyers that he should not get any prison time was a “ridiculous sentence”, even if he believed he did nothing wrong.

At trial, Hwang did not take the stand. But during cross-examination of the prosecution’s witnesses, his lawyers argued that Hwang had done nothing wrong and that the government was trying to punish him for being a high-risk trader.

Hwang’s legal team suggested that their client loved the stocks he invested in, and that was the reason he kept making bigger and bigger bets. He had never intended to deceive the banks that had lent his firm money, his lawyers said. NYTIMES