Archegos Founder Bill Hwang and CFO Charged With Securities Fraud

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Federal prosecutors alleged founder’s fraud pumped firm’s portfolio from $1.5 billion to $35 billion in one year

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They alleged that Mr. Hwang’s fraud pumped Archegos’s portfolio from $1.5 billion to $35 billion in one year. An indictment charging the two men was unsealed Wednesday morning.

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Federal prosecutors are expected to announce the charges at a morning news conference.

Archegos collapsed in March 2021, and its unwind sent shock waves through Wall Street. Banks scrambled to liquidate positions tied to Archegos, rapidly shaving tens of billions of market value off large companies and, when the dust had settled, dealing more than $10 billion in losses to counterparties including Credit Suisse Group AG

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Morgan Stanley and Nomura Holdings Inc.

At Archegos, Mr. Hwang built up large, concentrated positions in companies and held some positions in a mix of cash and swaps with money borrowed from banks across Wall Street. The swaps Hwang favored, which included total-return swaps and bullet swaps, gave Archegos the profits and losses on the stocks underlying the swap contracts while its lenders held the securities.

When stocks owned by Archegos rose, Mr. Hwang added to his top performers, often using swaps. That allowed Mr. Hwang and his family office to maintain their anonymity even as Archegos effectively owned 25% of some companies. (Investors holding more than 10% of a company’s securities are deemed to be company insiders and are subject to additional regulations around disclosure and profits.)

The strategy helped to grow Archegos’s size in short order from several billion to about $35 billion as of early 2021, said people familiar with the firm. But the dynamics favoring Mr. Hwang had shifted by March 2021. Already pressured by mounting losses in companies including China internet-search giant Baidu Inc.

and luxury online retailer FarFetch Ltd.

the announcement of additional financing by ViacomCBS Inc.

in late March sent its stock price falling and effectively triggered the unraveling of Archegos. Lenders were shocked to realize how much Archegos had borrowed from across Wall Street.

Write to Corinne Ramey at [email protected], Susan Pulliam at [email protected] and Juliet Chung at [email protected]


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