The owner of a New York-based hedge fund that collapsed when it defaulted on margin calls has been arrested on charges alleging he defrauded leading global investment banks and brokerages.
Bill Hwang, founder of Archegos Capital Management, leaves the courthouse in New York, Wednesday, April 27, 2022. The owner of the New York-based hedge fund that collapsed when it defaulted on margin calls was arrested Wednesday on charges alleging he defrauded leading global investment banks and brokerages of billions of dollars.
U.S. Attorney Damian Williams said at a news conference that the scheme"nearly jeopardized our financial system." Hwang, 58, of Tenafly, New Jersey, carried out the fraud from March 2020 to March 2021 by originally investing his personal fortune, which grew from $1.5 billion to over $35 billion, and later the investments he borrowed from major banks and brokerages, which grew from about $10 billion to over $160 billion, the indictment said.He hid the extent of his market prowess from investors by using derivative securities that had no public disclosure requirement, it said.
It said the schemes also caused millions of dollars in losses for innocent Archegos employees who had been required to allocate to the firm a substantial amount of their pay as deferred compensation.Separate civil charges against Hwang and Halligan, 45, of Syosset, were brought by the Securities and Exchange Commission.
“But the house of cards could only be sustained if that cycle of deceptive trading, lies and buying power continued uninterrupted, and once Archegos’s buying power was exhausted and stock prices fell, the entire structure collapsed, allegedly leaving Archegos’s counterparties billions in trading losses,” Grewal said.Hwang’s attorney, Lawrence Lustberg, said lawyers were “extremely disappointed” with a prosecution that they believe has “absolutely no factual or legal basis.
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