Sung Kook 'Bill' Hwang, the founder and head of a private investment firm known as Archegos, leaves the Manhattan federal courthouse, in New York, on April 27, 2022.Shannon Stapleton/Reuters
A jury was chosen on Thursday in the criminal racketeering trial of Sung Kook “Bill” Hwang over the 2021 collapse of his $36 billion fund Archegos Capital Management, setting the stage for opening statements and witness testimony next week.
The seven women and five men include a neuroscientist, a speech therapist and a utility company employee.
The trial before U.S. District Judge Alvin Hellerstein in Manhattan will delve into the implosion of Hwang’s lightly regulated family investment office Archegos, which prosecutors allege caused more than $100 billion in shareholder losses at companies in its portfolio. It is expected to last up to eight weeks but there are not expected to be proceedings on Fridays.
Prosecutors accuse Hwang of using financial contracts known as total return swaps to secretly amass outsize stakes in multiple companies without actually holding their stock.
His positions were so large they eclipsed that of the companies’ largest investors, driving up stock prices, prosecutors say. At its peak, they say, Archegos had $36 billion in assets and $160 billion of exposure to equities.
Falling stock prices in March 2021 triggered margin calls that Archegos was unable to meet. That, in turn, led some banks to dump the stocks backing his swaps, causing big losses for Archegos and its lenders, such as Credit Suisse, now part of UBS, and Nomura Holdings.
Prosecutors say Hwang and former Archegos Chief Financial Officer Patrick Halligan, who is also on trial, lied about their holdings to sustain their business relationship with global banks.
Hwang and Halligan are charged with racketeering conspiracy. Hwang faces an additional 10 counts of fraud and market manipulation, and Halligan an additional two counts of fraud. Each count carries a maximum potential sentence of 20 years.
The two men have pleaded not guilty and are expected to argue prosecutors are pushing a novel and nonsensical market manipulation theory.
Hwang’s lawyers have described the case as the “most aggressive open market manipulation case ever” brought by prosecutors. Several attorneys told Reuters it may be a tough case for the government.
Archegos head trader William Tomita and Chief Risk Officer Scott Becker have pleaded guilty to related charges and are expected to testify at the trial.