Archegos boss Bill Hwang arrested on fraud charges
The founder of collapsed investment firm Archegos Capital has been arrested and charged with orchestrating a fraudulent scheme, US regulators announced today.
Bill Hwang and his former top lieutenants Patrick Halligan, William Tomita, and Scott Becker have all been charged for their roles in the scheme which sparked the firm’s collapse last year.
Archegos, Hwang’s family investment firm, imploded after losing more than $20bn in two days, causing billions of dollars of losses for its investors and some of the world’s biggest lenders.
The US watchdog the Securities and Exchange Commission alleges that from at least March 2020 to March 2021 Hwang purchased on margin billions of dollars of total return swaps “without any economic purpose other than to artificially and dramatically drive up the prices of the various companies’ securities”.
Hwang then induced other investors to purchase those securities at inflated prices, the SEC claims.
SEC Chair Gary Gensler said Archegos’ underlined the global impact of fraud to the financial system.
“The collapse of Archegos last spring demonstrated how activities by one firm can have far-reaching implications for investors and market participants. I thank the SEC staff for taking swift action to hold these actors responsible for their alleged misconduct, which hurt investors across our capital markets,” he said.
“The failure of Archegos underscores the importance of our ongoing work to update the security-based swaps market to enhance the investor protections, integrity, and transparency of this market.”
Gensler said he was encouraging prime brokers and other market participants to remain “vigilant to the risks presented by counterparty relationships.”
Credit Suisse was among the lenders caught up in the maelstrom of Archegos’ collapse last year, taking a $5.5bn hit from the firm.
A report into commissioned by Credit Suisse into its relationship with Archegos found that it “failed to rein in and, indeed, enabled Archegos’s voracious risk-taking”.