Bill Hwang Wanted To Become A "Wall Street Legend", Prosecutors Allege In Opening Statements

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by Tyler Durden
Wednesday, May 15, 2024 - 09:20 PM

As the Bill Hwang trial began making its way through its first week, prosecutors described the family office manager as someone attempting to "become a legend on Wall Street" to jurors, according to the Financial Times

The trial of Hwang in Manhattan began this with hopes of uncovering motives behind his historic collapse that caused $100 billion in collateral damage.

Prosecutor Alexandra Rothman told the court in her opening statement: “From the inside these two men turned an investment business into a crime business, all because the defendant Bill Hwang wanted to become a legend on Wall Street..."

Hwang’s defense argued, meanwhile, that he was merely a committed investor who backed companies like ViacomCBS and Discovery.

One of his lawyers, Barry Berke, told the court Monday: “Mr. Hwang . . . most certainly put his money where his mouth is.” 

On Tuesday, testimony was heard from UBS risk manager Bryan Fairbanks, who revealed that UBS was startled to discover Archegos' main investments were in less liquid firms like Viacom, Discovery, and Tencent Holdings, contrary to earlier assurances of stable tech holdings like Apple and Google, according to Bloomberg.

This revelation made UBS anticipate significant losses, he said. Concerns grew as UBS felt Archegos prioritized other banks during portfolio liquidation to meet margin calls.

On a crucial call on March 25, Hwang unsuccessfully tried to reassure his major prime brokers by claiming he could stabilize Archegos' positions quickly, despite alarming loss figures.

“They weren’t trying to do anything to meet the margin call,” Fairbanks wrote in an email on March 25.

Meanwhile, Hwang's defense highlighted UBS's financial motives and attempted to expose potential biases in testimony, suggesting that UBS overlooked risks due to lucrative fees from Archegos.

The charges in Hwang's trial come from the 2021 collapse of the $36 billion dollar Archegos and Reuters has said that testimony could last up to 8 weeks. Prosecutors have said that Archegos' collapse led to $100 billion in shareholder losses at companies he held.

The trial is set to shed a light on how major Wall Street players accommodated, and potentially turned a blind eye, to risky tactics from a wealthy client. Hwang is being accused of using total return swaps to take massive positions in companies without holding their underlying stock. 

As Reuters notes, the company faced crippling margin calls in March 2021 due to falling stock prices. This, in turn, led to significant losses for Archegos and its lenders, including Credit Suisse and Nomura Holdings.

Archegos founder Bill Hwang and CFO Patrick Halligan, charged with racketeering conspiracy and multiple counts of fraud and market manipulation, have pleaded not guilty.

They contest the prosecutors' claims of market manipulation, which some legal experts view as a challenging case for the government. The trial is expected to feature testimony from Archegos’s guilty-pleading head trader and Chief Risk Officer, alongside potential appearances from bank executives.

Hwang was arrested in April 2022 and charged with racketeering conspiracy, securities fraud and wire fraud in connection with a scheme to manipulate the share prices of public companies in order to boost profits. He was then released on $100 million bail. 

According to the 40-page indictment, Hwang engaged in a "fraudulent scheme" that included "interlocking deceptive acts and misconduct, through false and misleading statements to security-based swap ("SBS") counterparties and prime brokers and manipulative trading designed to artificially move the market, which, in tandem, increased Archegos’s assets under management from around $4 billion to over $36 billion in just under six months."