Hedge fund operators go on trial after multibillion-dollar Archegos collapse
A federal fraud trial has begun for the owner and chief financial officer of a hedge fund that collapsed
NEW YORK — A federal fraud trial began Monday for the owner and chief financial officer of a hedge fund that collapsed when it defaulted on margin calls, costing leading global investment banks and brokerages billions of dollars.
Bill Hwang, the founder of Archegos Capital Management, and his former CFO Patrick Halligan, are being tried together. Prosecutors have accused Hwang of lying to banks to get billions of dollars that his New York-based private investment firm then used to inflate the stock price of publicly traded companies and grow its portfolio from $10 billion to $160 billion.
Their scheme involved secret trading in stock derivatives that made their private investment fund “a house of cards, built on manipulation and lies,” Assistant U.S. Attorney Alexandra Rothman told jurors.
“These two men made fraud their business,” Rothman said. “All because the defendant, Bill Hwang, wanted to be a legend on Wall Street.”
Hwang’s attorney, Barry Berke, countered that Hwang is not guilty, and he'll prove the prosecutor’s “theory is wrong.”
“It doesn’t make any sense and you will find that,” Berke said. “He didn’t live the life of a billionaire.”
The indictment said that Hwang led market participants to believe the prices of stocks in the fund's portfolio were the product of natural forces of supply and demand, when in reality, they resulted from manipulative trading and deceptive conduct that caused others to trade.
Hwang and Halligan pleaded not guilty, while the head trader for Archegos and its chief risk officer have pleaded guilty and are cooperating with prosecutors.
According to the indictment, Hwang first
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