(Bloomberg) — Archegos Capital Management founder Bill Hwang was ordered to serve 18 years in prison for fraud and market manipulation related to the stunning $36 billion collapse of his family office in 2021, ending a case that hit Wall Street.
Hwang, 60, was sentenced Wednesday by U.S. District Judge Alvin Hellerstein in New York. The prison term was slightly less than the 21 years prosecutors had sought. Hwang's lawyers had initially asked that he be spared jail at all.
“The amount of loss that has been caused by your conduct is greater than any amount of loss that I have dealt with as a judge,” Hellerstein said.
Hwang was found guilty in July of orchestrating a scheme to trick his banking counterparts into providing Archego with billions of dollars in trading capacity that inflated the value of his portfolio until the bubble burst in March 2021. The burst contributed to the death of one of the biggest names in finance, Credit Suisse Group AG, and caused significant losses at Morgan Stanley, UBS Group AG, Nomura Holdings and other banks.
Archego's Hwang Criminal Conviction Explained: QuickTake
Hellerstein signaled during Wednesday's hearing that he intended to impose a harsh sentence on Hwang. The judge called his request for no jail time “absolutely ridiculous” in light of the money involved and compared Hwang to FTX founder Sam Bankman-Fried, who was sentenced to 25 years for fraud.
“What was worse? Mr. Bankman-Fried's fraud or Mr. Hwang's fraud?” asked the judge.
During the hearing, Hwang's lawyer, Dani James, backed away from a request for no jail time and suggested a sentence of four to five years. She highlighted his charity work and humble lifestyle, noting that he still lives in a modest home in New Jersey. But the judge expressed skepticism about Hwang's claim of modesty, noting his “new apartment at Hudson Yards.”
Hwang himself spoke only briefly, saying he felt “deep pain” over what happened at Archegos. After thanking his wife and supporters who wrote letters asking for leniency, he asked the judge to impose a sentence that would allow him to continue serving society.
Prosecutor Andrew Thomas argued for a harsh sentence in part on the grounds that Hwang was a repeat offender, noting that his previous hedge fund, Tiger Asia, pleaded guilty to insider trading in 2012. Hellerstein said he would consider this in his sentencing and also rejected Hwang's claims that his actions at Archegos did not clearly contribute to the banks' losses.
Victims of Wall Street
The fact that the victims were primarily Wall Street banks set Archego apart from most large white-collar cases. Hwang's lawyers had planned to argue in court that the banks were sophisticated players who understood the risks of trading with Archegos but took them to earn lucrative fees. Hellerstein largely sided with prosecutors in barring a “blame the victim” defense, which could be a key issue in the planned appeal of his conviction.
The jury found that Hwang instructed Archego staff to tell banks that the firm had large positions in technology giants such as Apple Inc. and Microsoft Corp. In reality, its money was heavily concentrated in a small group of fairly illiquid stocks, especially the company of the time. known as ViacomCBS, that its trading could move. To maximize the impact of his trades, Hwang typically bought swaps, knowing that his counterparty banks would hedge by buying the shares directly.
Archegos fell into a fatal spiral after a March 2021 selloff in Viacom stock triggered billions of dollars in margin calls.
Archego's indictment was the first major white-collar case brought by Manhattan U.S. Attorney Damian Williams following his appointment in 2021 by President Joe Biden. Along with the Bankman-Fried prosecution, it was hailed as a sign of a more aggressive approach to financial crime policing. President-elect Donald Trump has said he intends to nominate former Securities and Exchange Commission Chairman Jay Clayton to succeed Williams.
Archego's former chief financial officer Patrick Halligan was convicted alongside Hwang but will be sentenced separately in January.
The case is US v. Hwang, 22-cr-240, US District Court, Southern District of New York (Manhattan).