Archegos found Sung Kook 'Bill' Hwang arrives at federal court, in New York, on May 21.David Dee Delgado/Reuters
Former billionaire investor Sung Kook (Bill) Hwang was sentenced to 18 years in prison on Wednesday over the collapse of Archegos Capital Management, which cost Wall Street banks more than US$10-billion.
Mr. Hwang was sentenced by U.S. District Judge Alvin Hellerstein in Manhattan, where a jury convicted Mr. Hwang in July on 10 criminal charges including wire fraud, securities fraud and market manipulation.
“The amount of losses that were caused by your conduct are larger than any other losses I have dealt with,” Justice Hellerstein said before announcing the sentence.
Archegos’ March, 2021, implosion took less than a week, stunning Wall Street and Mr. Hwang’s lenders.
The U.S. Attorney’s office in Manhattan sought a 21-year prison term for Mr. Hwang – unusually long for a white-collar case – and for him to forfeit US$12.35-billion and make restitution to victims.
“It stands among a rare class of cases that truly could be described as a national calamity,” prosecutor Andrew Thomas said at the sentencing hearing before Justice Hellerstein.
Justice Hellerstein did not reach a decision on Wednesday on whether Mr. Hwang must forfeit money or pay restitution. The sentencing hearing is expected to resume on Thursday.
Before sentencing Mr. Hwang, Justice Hellerstein asked the defendant’s lawyer, Dani James, how she thought Mr. Hwang compared to Sam Bankman-Fried, who was sentenced in March to 25 years in prison for stealing US$8-billion from users of the now-bankrupt FTX Exchange.
“Mr. Bankman-Fried was literally stealing from his customers,” Ms. James said. “I don’t think that’s what’s happened here.”
Mr. Hwang had asked for no prison, forfeiture or restitution, and to remain free on bail while he appealed his conviction. Ms. James said his low risk of committing more crimes meant a lengthy prison term served no purpose.
“The notion that he would commit a crime in the future, it’s just not so,” Ms. James said.
Mr. Bankman-Fried denies wrongdoing and is appealing his conviction.
Mr. Hwang, 60, was a protégé of late hedge-fund billionaire Julian Robertson.
He set up Archegos in New York as a family office in 2013, the year after his former hedge fund Tiger Asia Management pleaded guilty to wire fraud in an insider-trading case.
Prosecutors accused Mr. Hwang of lying to banks about Archegos’ portfolio so he could borrow money aggressively and make concentrated bets on media and technology stocks such as ViacomCBS, now called Paramount Global.
While Archegos eventually managed US$36-billion, Mr. Hwang’s borrowing helped him amass US$160-billion of exposure to stocks.
His downfall occurred when Mr. Hwang was unable to meet margin calls, as the prices of some of his favourite stocks began falling and various banks unloaded stocks that had backed his so-called total return swaps.
More than US$100-billion of market value in Mr. Hwang’s stocks was wiped out. Several banks suffered losses, including Credit Suisse, which lost US$5.5-billion, and Nomura Holdings. Credit Suisse is now part of UBS.
Mr. Hwang’s lawyers’ request for no punishment also cited Mr. Hwang’s Christian faith and his non-profit Grace and Mercy Foundation, which has since 2006 donated at least US$600-million to combat homelessness, poverty and human trafficking, among other causes.
In a statement to the court before Justice Hellerstein announced the sentence, Mr. Hwang said he hoped the punishment would “allow me to serve as much as I can given the circumstances.”
Mr. Hwang’s lawyers have said his net worth has fallen to “at most” US$55.3-million.
Mr. Hwang’s co-defendant, former Archegos chief financial officer Patrick Halligan, was convicted at the same trial on three criminal charges. His sentencing is scheduled for Jan. 27. Both chose not to testify at their two-month trial.