Bill Hwang, the founder of Archegos Capital Management, went on trial on May 8, 2024, in Manhattan federal court over allegations of racketeering conspiracy and securities fraud related to the collapse of his $36 billion hedge fund. The trial is expected to last for eight weeks and will delve into Hwang's use of derivatives to secretly amass large positions in stocks without actually owning them, driving up stock prices and causing significant losses when those prices fell.
Hwang arrived at the courtroom on Wednesday for the start of jury selection, facing charges that carry a maximum potential sentence of 20 years. He and his former chief financial officer, Patrick Halligan, have pleaded not guilty to the charges.
The trial will also examine Hwang's relationship with global banks and how he allegedly lied about his holdings to sustain their business relationship. Several attorneys have described the case as a tough one for prosecutors due to its complexity and novelty.
Archegos Capital Management collapsed in March 2021 after falling stock prices triggered margin calls that the firm was unable to meet, leading some banks to dump stocks backing its swaps and causing significant losses. The collapse affected major financial institutions such as Credit Suisse, now part of UBS, and Nomura Holdings.
Hwang's lawyers have described the case as an aggressive open market manipulation case brought by prosecutors. Each count carries a maximum potential sentence of 20 years.
The trial is expected to begin in earnest on Monday with opening statements from both sides. Hwang and Halligan are represented by high-profile defense attorneys, including Barry Berke for Hwang.
Archegos Capital Management's collapse was a result of the firm's use of financial contracts known as total return swaps to take outsized stakes in its favorite holdings without actually owning the stock. At its peak, Archegos had $36 billion in assets and $160 billion of exposure to equities.
The trial will provide insight into the inner workings of Hwang's investment strategies and the role that global banks played in his business dealings. It is expected to be closely watched by the financial industry and investors alike.