U.S. prosecutors charged Archegos Capital Management founder Bill Hwang and Chief Financial Officer Patrick Halligan with fraud, in the latest fallout from the spectacular collapse of the family office.
Federal authorities said Hwang used Archegos as an “instrument of market manipulation and fraud,” causing billions of dollars in losses for banks, financial market investors and its own employees.
Hwang and Halligan were charged with racketeering conspiracy, securities fraud, and wire fraud offenses. The alleged fraud artificially inflated Archegos’s portfolio from $1.5 billion to $35 billion in one year, according to a statement from Manhattan U.S. Attorney Damian Williams.
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The men used Archegos to defraud market participants by “manipulating, controlling and artificially affecting the market for certain securities in Archegos’s portfolio,” according to an indictment released Tuesday. They also “repeatedly made materially false and misleading statements about Archegos’s portfolio of securities to numerous leading global investment banks and brokerages,” which encouraged them to trade with and extend credit to Archegos, the goverment said.
Archegos, Bill Hwang’s family office, imploded in March 2021 after amassing a concentrated portfolio of stocks exceeding $100 billion by using borrowed money. It collapsed after some of the shares tumbled, triggering margin calls from banks, which then dumped Hwang’s holdings. Banks lost more than $10 billion, prompting the departures of several senior executives and probes into the way firms monitor the risks run by their businesses serving hedge funds.
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