Archegos founder Bill Hwang hit with criminal charges

Archegos Capital Management founder Bill Hwang and Chief Financial Officer Patrick Halligan were arrested and 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, 57, and Halligan, 45, were arrested early Wednesday and are expected to appear in Manhattan federal court later in the day.

The two men 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. The Securities and Exchange Commission and the Commodity Futures Trading Commission filed related civil complaints as well.

“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.”

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.

Speaking at a white-collar crime conference in New York Wednesday morning, Deputy U.S. Attorney General Lisa Monaco said the case against Hwang and Halligan “really typifies and exemplifies the focus we are placing on holding individuals accountable when it comes to corporate crime and when it comes to corporate malfeasance.” 

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.