Bill Hwang Family Office, Archegos Capital Management
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United States SEC Charges Archegos Family Office Bill Hwang, CFO, CRO & Head Trader for Market Fraud, $1.5 Billion Assets to $160 Billion Exposure

28th April 2022 | Hong Kong

The United States Securities and Exchange Commission (SEC) has charged Sung Kook (Bill) Hwang, the owner of family office Archegos Capital Management, Chief Financial Officer (Patrick Halligan), Chief Risk Officer (Scott Becker) and Head Trader (William Tomita) for orchestrating a market manipulation fraudulent scheme from $1.5 billion asset value (March 2020) to $160 billion exposure (March 2021) that resulted in billions of dollars in losses.  United States SEC: “From at least March 2020 to March 2021, Hwang purchased on margin billions of dollars of total return swaps. These security-based swaps allow investors to take on huge positions in equity securities of companies by posting limited funds up front. As alleged, Hwang frequently entered into certain of these swaps without any economic purpose other than to artificially and dramatically drive up the prices of the various companies’ securities, which induced other investors to purchase those securities at inflated prices. As a result of Hwang’s trading, Archegos allegedly underwent a period of rapid growth, increasing in value from approximately $1.5 billion with $10 billion in exposure in March 2020 to a value of more than $36 billion with $160 billion in exposure at its peak in March 2021.”  View full statement below | Read Archegoes History

“ $1.5 Billion Assets to $160 Billion Exposure “

United States SEC Official Statement:

Bill Hwang Family Office, Archegos Capital Management

27th April 2022 | The Securities and Exchange Commission today charged Sung Kook (Bill) Hwang, the owner of family office Archegos Capital Management, LP (Archegos), with orchestrating a fraudulent scheme that resulted in billions of dollars in losses. The SEC also charged Archegos’s Chief Financial Officer, Patrick Halligan; head trader, William Tomita; and Chief Risk Officer, Scott Becker for their roles in the fraudulent scheme.


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The SEC’s complaint alleges that, from at least March 2020 to March 2021, Hwang purchased on margin billions of dollars of total return swaps. These security-based swaps allow investors to take on huge positions in equity securities of companies by posting limited funds up front. As alleged, Hwang frequently entered into certain of these swaps without any economic purpose other than to artificially and dramatically drive up the prices of the various companies’ securities, which induced other investors to purchase those securities at inflated prices. As a result of Hwang’s trading, Archegos allegedly underwent a period of rapid growth, increasing in value from approximately $1.5 billion with $10 billion in exposure in March 2020 to a value of more than $36 billion with $160 billion in exposure at its peak in March 2021.

The complaint also alleges that, as part of the scheme, Archegos repeatedly and deliberately misled many of Archegos’s counterparties about Archegos’s exposure, concentration and liquidity, in order to get increased trading capacity so that Archegos could continue buying swaps in its most concentrated positions, thereby driving up the price of those stocks.  Ultimately in March 2021, price declines in Archegos’s most concentrated positions allegedly triggered significant margin calls that Archegos was unable to meet, and Archegos’s subsequent default and collapse resulted in billions of dollars in credit losses among Archegos’s counterparties.

“Today, we charged Archegos Capital Management and affiliated individuals with committing fraud and manipulating stock prices using total return swaps. 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,” said SEC Chair Gary Gensler. “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. Further, I encourage prime brokers and other market participants to remain vigilant to the risks presented by counterparty relationships.”

“We allege that Hwang and Archegos propped up a $36 billion house of cards by engaging in a constant cycle of manipulative trading, lying to banks to obtain additional capacity, and then using that capacity to engage in still more manipulative trading,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “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.”

The SEC’s complaint, filed in federal district court in Manhattan, charges Hwang and the other defendants with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC also seeks to bar individual defendants from serving as a public company officer and director.

In parallel actions, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges for similar conduct, and the Commodity Futures Trading Commission (CFTC) announced civil charges.

The SEC’s ongoing investigation is being conducted by David Zetlin-Jones and Brian Fitzpatrick of the Asset Management Unit and Joshua Brodsky of the Complex Financial Instruments Unit, with assistance from Stephen Johnson of the New York Regional Office. It is being supervised by Andrew Dean and Dabney O’Riordan of the Asset Management Unit and Osman Nawaz of the Complex Financial Instruments Unit. The litigation will be led by Mr. Zetlin-Jones and Jack Kaufman. Additional assistance to the investigation was provided by Dennis Hamilton and Adam Yonce of the SEC’s Division of Economic and Risk Analysis. The SEC acknowledges the assistance and cooperation of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the CFTC.

Federal Reserve: Weak Practices in Banks with Exposure to $120 Billion Archegos Family Office

In November 2021, the United States Federal Reserve (Fed) released information on weak practices in banks with exposure to $120 billion Archegos family office, which operates like a hedge fund and causing $10 billion of trading losses to the world’s largest banks including Credit Suisse, UBS, Nomura, MUFJ and Morgan Stanley.  According to the United States Federal Reserve Supervision and Regulatory Report, the collapse of Archegos family office had revealed weaknesses in margin practices and counter-party risk management at some firms.  In the report, no banks were named but the Federal Reserve will be providing direct feedback to the financial institutions that would cause vulnerability in the financial system.

 

Archegos Family Office – $120 Billion Exposure

Credit Suisse which suffered a loss of $5.5 billion, had released a full investigative report, detailing the relationship, built-up to losses and revenue from Archegos Family Office.  Archegos Family Office, Korean-American Bill Hwang family office which operates like a hedge fund, had total exposure of $120 billion in March 2021, causing $10 billion of trading losses to the world’s largest banks including Credit Suisse, UBS, Nomura, MUFJ and Morgan Stanley.  Read More: Credit Suisse Report: Archegos Family Office Had $120 Billion Total Exposure

 

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2020 Report: Singapore Asset Mgmt - $3.48 Trillion AUM

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