The Rise and Fall of Archegos Capital Management

In the spring of 2021, the financial world was rocked by the collapse of Archegos Capital Management, orchestrated by its founder Bill Hwang. The fallout resulted in staggering losses for prominent Wall Street banks, totaling billions of dollars.

The Allegations

During the closing arguments of the trial, federal prosecutor Andrew Thomas accused Bill Hwang of engaging in deceitful practices, which he described as “lies and manipulation.” Thomas claimed that Hwang artificially inflated stock prices to boost the value of Archegos, ultimately defrauding banks and other market participants.

The Defense

On the other hand, Bill Hwang’s defense attorney, Barry Berke, argued that his client’s trading strategy, although high-risk, was not manipulative. Berke contended that Hwang’s investment decisions were based on his belief in the companies he backed, rather than any intent to deceive.

The Charges

Bill Hwang faces a litany of charges, including securities fraud, wire fraud, conspiracy, racketeering, and market manipulation. If found guilty on all counts, Hwang could potentially face a life sentence behind bars.

The Fallout

The downfall of Archegos not only led to significant financial losses for Wall Street banks, amounting to nearly $10 billion, but also resulted in a substantial depletion of Hwang’s personal wealth. Despite its relatively low profile on Wall Street prior to its collapse, Archegos managed a substantial portfolio, reaching $36 billion under Hwang’s management and controlling stocks valued at over $100 billion.

The firm’s use of complex derivatives and significant leveraging from banks enabled it to amass such substantial positions in the market, operating similarly to a hedge fund but with fewer regulatory constraints.