four charged in connection with the multi-billion dollar collapse of Archegos Capital Management | Takeover bid

An indictment was released today accusing Sung Kook (Bill) Hwang, the founder and head of a private investment firm known as Archegos, and Patrick Halligan, Chief Financial Officer of Archegos, racketeering conspiracy, securities fraud and wire fraud offenses in connection with interrelated torts. schemes to illegally manipulate the prices of publicly traded securities in Archegos’ portfolio and to defraud numerous leading global investment banks and brokerage houses. Assistant Attorney General Lisa O. Monaco, U.S. Attorney Damian Williams for the Southern District of New York, and Deputy Director Michael J. Driscoll of the FBI’s New York Field Office made the announcement. Both defendants were arrested earlier today and will appear before U.S. Magistrate Judge Jennifer E. Willis this afternoon. The case was assigned to U.S. District Judge Andrew L. Carter, Jr.

The guilty pleas of Scott Becker and William Tomita regarding their participation in the conspiracy are also not sealed today. Becker pleaded guilty to an information before U.S. District Judge Laura Taylor Swain on April 21. Tomita pleaded guilty following an information before Judge Swain on April 21. Both cooperate with the government.

“Today’s announcement demonstrates the department’s unwavering commitment to holding accountable individuals who distort and defraud our financial markets, including those occupying the C-Suite,” Monaco’s Deputy Attorney General said. . “That’s especially true for this kind of crime – one that leaves a financial crater in its wake.”

“We allege that these defendants and their co-conspirators lied to the banks to obtain billions of dollars which they then used to inflate the stock prices of a number of publicly traded companies,” the attorney said. American Williams. “Lies fueled inflation, and inflation led to more lies. It was spinning and spinning. Within a year, Hwang reportedly turned a $1.5 billion wallet and turned it into a wallet. $35 billion. But last year, the music stopped. The bubble burst. Prices went down. And when they did, billions of dollars of capital evaporated almost overnight. next day.

“As alleged, Hwang and his co-conspirators convinced major financial institutions to enter into deals with them based on lies, the outcome of which ultimately led to a massive market manipulation scheme,” the deputy director of the FBI Michael J. Driscoll. . “We allege that the defendants caused harm to the U.S. financial markets and ordinary investors, causing significant losses to banks, market participants and Archegos employees. Today’s charges underscore our commitment to ensuring that the investment industry remains free from fraudulent activity of all kinds.

According to the allegations in the indictment unsealed today in Manhattan federal court:

Sung Kook (Bill) Hwang is the founder and owner of Archegos Capital Management and its associated business entities, which are collectively known as Archegos. As alleged, Hwang, along with Patrick Halligan, Scott Becker and William Tomita lied to the banks to obtain billions of dollars which they then used to artificially inflate the stock prices of a number of publicly traded companies.

Hwang and his co-conspirators invested in stocks primarily through special contracts with banks and brokers called “swaps.” As alleged, these exchanges allowed Hwang to induce massive purchases of certain stocks, including on carefully selected days and times, to artificially inflate stock prices. Hwang, Halligan and their co-conspirators lied to the banks and used a series of manipulative trading techniques to keep those prices high and keep them from falling. This has led to the inflation of these stock prices. Within a year, Hwang turned a $1.5 billion wallet and fraudulently inflated it into a $35 billion wallet.

Last year, when prices fell, Hwang’s positions were sold and he could no longer manipulate prices, and billions of dollars of capital evaporated almost overnight.

As alleged, the defendants committed this fraud in secret. Since 2014, Hwang has run Archegos as a private hedge fund or “family office”, which means that Archegos, unlike other large hedge funds, was not required to provide regulators with information about its holdings and its structure. debt that could have brought the fraud to light and averted the crisis.

And because Hwang traded primarily through swaps, he was able to make the purchases alleged in the indictment without anyone knowing that Archegos was actually behind all the trades. Regular market participants, and even the companies themselves, have been duped into thinking that price increases were caused by the normal interaction of supply and demand when instead, as is claims, they were the artificial result of Hwang’s manipulative trade.

For example, as alleged, as of March 24, 2021, Hwang effectively controlled over 50% of Viacom’s freely traded stock – and no one outside of Archegos knew about it – not the investors buying Viacom on the market, nor the executives of Viacom. himself, or even the banks and brokerage houses that held the shares under the swaps. Because, as is claimed, by using various banks and brokerage houses for his swaps, Hwang ensured that no institution would have any idea that he was behind all these swaps.

The indictment further alleges that to obtain the billions of dollars Archegos needed to back this market manipulation scheme, Hwang and his co-conspirators lied and misled some of Wall Street’s major banks on the matter. he extent of Archegos’ investments, the amount of money Archegos had on hand and the nature of the shares held by Archegos. As it is claimed, they told these lies so that the banks would have no idea what Archegos was really doing, how risky the portfolio was, and what would happen if the market turned.

As alleged, just over a year ago the market turned and the stock prices that Hwang and his accomplices had artificially inflated crashed, causing immense damage to US financial markets and ordinary investors. . Within days, the companies at the center of the Archegos trading system lost over $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed. Market participants who bought the affected shares at artificial prices lost the value they believed they held from their investments, banks lost billions of dollars, and Archegos employees, many of whom had to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars.

* * *

A table containing the names, ages, residences, charges and maximum sentences for the defendants is attached. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by a judge.

This case was investigated by the US Attorney’s Office for the Southern District of New York and the FBI. The Organized Crime and Gangs Section of the Department of Justice provided invaluable assistance. The United States Securities and Exchange Commission and the United States Commodity Futures Trading Commission, each of which today filed a parallel civil action, assisted and cooperated with this investigation.

If you believe you are a victim of the scheme alleged in this press release, we encourage you to contact law enforcement at USANYS.ARCHEGOS@USDOJ.GOV.

This case is being handled by the bureau’s Securities and Commodities Fraud Task Force. Assistant US Attorneys Andrew Thomas, Matthew Podolsky and Alex Rossmiller are in charge of the prosecution.

An indictment is only an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt by a court.

Respondent

Age

Residence

Charges

Maximum potential penalty(s)

United States v. Sung Kook (Bill) Hwang and Patrick Halligan, 22 Cr. 240

HANG

58

Tenafly, New Jersey

Racketeering conspiracy, 18 USC § 1962(d) (count one)

Securities fraud, 15 USC §§ 78j(b) & 78ff (counts two and ten)

Market manipulation, 15 USC §§ 78i & 78ff (accounts two through nine)

electronic fraud,

18 USC § 1343 (count eleven)

20 years

20 years (on each head)

20 years (on each head)

20 years

HALLIGAN

45

Syosset, NY

Racketeering conspiracy, 18 USC § 1962(d) (count one)

Securities Fraud, 15 USC §§ 78j(b) & 78ff (count ten)

electronic fraud,

18 USC § 1343 (count eleven)

20 years

20 years

20 years

United States against Scott Becker and William Tomita, 22 Cr. 231 (LTS)

BECKER

38

Goshen, NY

Conspiracy to commit racketeering conspiracy, 18 USC § 1962(d) (count one)

Securities fraud, 15 USC §§ 78j(b) & 78ff (count two)

electronic fraud,

18 USC § 1343 (count three)

20 years

20 years

20 years

TOMITE

38

Greenwich, Connecticut

Racketeering conspiracy, 18 USC § 1962(d) (count one)

Securities fraud, 15 USC §§ 78j(b) & 78ff (counts two and four)

Market manipulation, 15 USC §§ 78i & 78ff (count three)

electronic fraud,

18 USC § 1343 (count five)

20 years

20 years (on each head)

20 years

20 years

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