Jail after family-owned hedge fund blamed for causing $17b in losses

Sung Kook “Bill” Hwang (left), founder of Archegos Capital Management, leaves a federal court after his sentencing hearing for convictions of fraud and market manipulation, in New York City on November 20. Photo / Adam Gray, AFP
The founder of US investment firm Archegos, Bill Hwang, has been jailed for 18 years for a multibillion-dollar fraud that contributed to the fund’s 2021 implosion, US media have reported.
In July, a jury in New York convicted South Korean-born Hwang on 10 of the 11 charges he faced and for which he could have been sentenced to spend the rest of his life in prison.
“The sentence has to reflect the seriousness of the event,” said judge Alvin Hellerstein according to The New York Times, which also reported the 18-year prison sentence.
Hwang’s family-owned hedge fund had taken huge bets on a few stocks with money borrowed from banks, and when one of those bets soured, the fund was unable to meet “margin calls” to cover the losses.
The subsequent collapse of the fund sent shockwaves through the markets and caused $10 billion (NZ$17.01b) in losses for Credit Suisse, Nomura, Morgan Stanley and other large financial institutions.
Credit Suisse was the hardest hit, losing some $5.5b, which further weakened the bank and pushed it close to bankruptcy in 2023 before it was taken over by its Swiss rival UBS.
During the case, the prosecution relied on two former Archegos executives, one testifying that Hwang had instructed him to misrepresent the fund’s finances.
The case came about after Archegos took stakes in several companies with the goal of driving up share prices, including in ViacomCBS, which is now Paramount Global.
At its peak in March 2021, Archegos was exposed to $160b through derivatives.
The plan worked initially, almost quadrupling the value of ViacomCBS, but quickly unravelled when that company announced a capital increase in 2021, triggering a sudden sell-off on Wall Street.
This started a domino effect that plunged the value of shares held by Archegos and in turn hit the banks that had provided funds to Hwang’s firm.
© Agence France-Presse