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Fund Managers Arrested As $20B Implosion Spreads vg bv - update 3

The two managed the fund before it collapsed in March 2019 in a $20 billion fallout in the swaps market

The manager of failed family fund Archegos Capital was arrested April 27 at his home in Manhattan, as authorities announced a slew of indictments and new investigations from two separate agencies.

Bill Hwang managed the fund before it imploded in March 2019 in a $20 billion fallout in the swaps market, startling regulators and causing a massive ripple effect across the larger market for companies including ViacomCBS, Baidu, Discovery, Tencent and Vipshop.

Archegos Chief Financial Officer Patrick Halligan was also arrested in Manhattan on April 27.

The two now face new civil investigations as well, after the Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission filed complaints on the same day.

What Happened to Archegos?

The fund’s collapse brought new and sharper scrutiny to how banks were managing risk, when a lackluster offering of ViacomCBS lead to an unwinding of positions that hit major banks like Credit Suisse, Morgan Stanley and Nomura hard.

That sluggish debut forced Archegos to liquidate $20 billion amid what regulators allege was market manipulation and fraud orchestrated by Hwang and his lieutenant.

“The scale of the trading was stunning,” Damian Williams, the U.S. Attorney for the Southern District of New York, said at a press event. “This was not business as usual or some sophisticated strategy, it was fraud.”

Hwang’s attorney Lawrence Lustberg said in a statement that Hwang was not guilty of anything in the 59-page indictment.

“Bill Hwang is entirely innocent of any wrongdoing,” Lustberg said in a statement. “There is no evidence whatsoever that he committed any kind of crime, let alone the overblown allegations that pervade this indictment.”

What Are The Charges?

Authorities from the U.S. Attorney for the Southern District of New York said in the indictment that Hwang and Halligan were being charged with multiple white-collar crimes.

They cover securities fraud, racketeering conspiracy, wire fraud and market manipulation and cover 11 criminal counts total.

In the massive indictment unsealed April 27, authorities allege that Hwang backed much of the fund with his personal fortune and inflated its value from $1.5 billion to more than $35 billion in just a year.

That misled banks, the indictment said, and pushed Hwang’s market positions via Archegos to an astronomic high of $160 billion before it crashed.

Lustberg said Hwang has been cooperating with authorities.

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This story was originally published April 29, 2022 8:20 AM.

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