The Rise and Fall of Archegos: A Financial Scandal Unfolds

A Manhattan federal jury deliberates on criminal charges against Archegos Capital's founder Bill Hwang after the collapse of his $36 billion firm. Hwang and his deputy Patrick Halligan face charges of racketeering conspiracy, fraud, and market manipulation, accused of inflating stock prices and deceiving banks.

A jury in Manhattan federal court commenced deliberations on Tuesday in the criminal case against Sung Kook "Bill" Hwang, the founder of Archegos Capital Management, who stands accused of manipulating stock prices before his firm's dramatic 2021 collapse. Prosecutors and defense lawyers delivered their closing arguments on Monday for Hwang and his deputy, co-defendant Patrick Halligan.

Hwang's lawyer argued that the prosecution had criminalized aggressive but legal trading tactics, while a federal prosecutor countered with claims that Hwang and Halligan unlawfully inflated stock prices and misled banks about Archegos' holdings. U.S. District Judge Alvin Hellerstein provided jurors with legal instructions before deliberations began.

Hwang, aged 60, has pleaded not guilty to one count of racketeering conspiracy and ten counts of fraud and market manipulation. Halligan, 47, has similarly pleaded not guilty to fraud and racketeering conspiracy. If found guilty, they could face up to 20 years in prison for each charge, although the actual sentences may be lower based on various factors determined by the judge. The trial highlights the extraordinary collapse of Archegos, which led to global banks incurring billions in losses and shareholders suffering over $100 billion in damages.

Prosecutors allege that Hwang accumulated large stakes in multiple companies covertly without owning their stock, deceived banks about Archegos' holdings, and used borrowed funds to inflate stock prices. According to the U.S. Attorney's Office for the Southern District of New York, Hwang's leveraged positions outstripped those of companies' biggest investors, driving up stock values significantly. At its zenith, prosecutors said, Archegos held $36 billion in assets and $160 billion in stock exposure.

The crisis peaked in March 2021 when falling stock prices led banks to demand more deposits from Archegos, which the firm couldn't provide. Consequently, banks sold the stocks backing Hwang's swaps, erasing $100 billion in shareholder value and causing billions in losses for several banks, notably $5.5 billion for Credit Suisse and $2.9 billion for Nomura Holdings.

(With inputs from agencies.)