The indictment, released Wednesday, accused Hwang, 58, and former CFO Patrick Halligan, 45, of using Archegos as a “market manipulator and fraud tool” with “far-reaching implications for other US stock market participants.” ». The Manhattan federal prosecutor’s case marks the first criminal charges against Hwang, one of the so-called Tiger Cub veterans of Julian Robertson’s Tiger Management fund, whose little-known investment vehicle shook financially Wall Street when it collapsed. a year ago. “The scale of the transaction has been astonishing,” said Damian Williams, a U.S. attorney for the Southern District of New York. While Archegos was a relatively dark family office, it managed to attract many large lenders. Archegos’s capital increased from $ 1.5 billion in March 2020 to $ 35 billion a year later, bringing the group’s holdings to $ 160 billion. The collapse of Archegos caused billions of dollars in losses to investment banks, including Credit Suisse, UBS, Nomura and Morgan Stanley, after the margin fell, with more than $ 100 billion being removed from the valuations of Archegos. . The group used borrowed money from banks such as Morgan Stanley and Credit Suisse to raise multibillion-dollar positions in US-listed companies such as ViacomCBS – now known as Paramount – and online retailers Shopify and Farfetch. Using derivatives, where the bank with which it traded bought or sold shares on behalf of the Chief, the company did not leave a visible imprint of its activity on the investing public. “This plan was historic in scope,” Williams said. “The lies fed them [stock price] inflation and inflation fueled more lies. Go around and around. “But last year the music stopped, the bubble burst, prices fell and when they did, billions of dollars almost evaporated overnight.” Huang and Hulligan pleaded not guilty during a Manhattan federal court hearing. Dressed in a green polo neck sweater, Huang agreed to sign a $ 100 million bond, secured by $ 5 million in cash and an interest in two properties, including his home. The former hedge fund manager has agreed to travel restrictions restricting his travels to New Jersey, Connecticut and parts of New York. He said he lost his passport and promised not to apply for a new one, a government lawyer told the court. A Hwang’s lawyer said Wednesday that the investor was “completely innocent of any wrongdoing” and that the allegations were “exaggerated”. “We are extremely disappointed that the U.S. Attorney’s Office has deemed it appropriate to prosecute a case that has absolutely no factual or legal basis. “This type of prosecution, for open market transactions, is unprecedented and threatens all investors,” said Lawrence Lustberg, an adviser to Hwang. A Hulligan lawyer said he was innocent and “will be acquitted”. Scott Becker, who was the director of risk management at Archegos, and William Tomita, the head trader at the family office, were also charged with their roles in the alleged conspiracy. They have pleaded guilty and are cooperating with the US government, according to the Department of Justice. The Hellenic Capital Market Commission filed a parallel civil lawsuit against Archegos and Hwang on Wednesday morning. He said that in March 2021, Archegos derivatives and shares in ViacomCBS accounted for more than half of the company’s freely tradable shares. The SEC said that in June 2020, when asked by a colleague if the relative strength of ViacomCBS shares was “a sign of strength” on the day the wider stock market collapsed, Hwang sent a message: “No. “It’s a sign that I’m buying.” Add the emoji for tears of joy or laughter, the SEC noted. The Commodity Futures Trading Commission has also filed charges of civil fraud against Archegos and Halligan.

Prosecutors allege that Huang and Hulligan managed two interconnected criminal plots. They accused Archegos of covering up its trades and positions so that its counterparties and other market traders believed that “the prices of these shares were a product of the natural forces of supply and demand, when in fact they were artificial.” of Hwang Manipulative Transactions “. The indictment also alleges that the defendants misunderstood the group’s investment plans and participations, as Archegos borrowed billions of dollars from major Wall Street lenders to support its transactions. While these banks knew Archegos was betting on a relatively small number of transactions, prosecutors said they had been misinformed about the scale of those transactions and had been assured by the family office that Archegos could exit in just two weeks. But it was not so. Last year, the group’s position on ViacomCBS exceeded $ 20 billion, and its transactions with the multimedia company accounted for more than 10 percent of its daily stock activity. Prosecutors said it would take Archegos more than three months to sell the ViacomCBS share without significantly changing the price. Huang also occasionally coordinated dealings with a former anonymous colleague who runs a hedge fund, according to prosecutors. When Archegos sought to increase its stake in GSX Techedu in 2021, it reached the limit with one of its leading brokers refusing to buy a larger stake in the US-listed Chinese education company. This limit limited his ability to enter into new exchange contracts with GSX with any of its customers. Hwang knew that the former colleague, described as a “close friend”, had a similar position at GSX Techedu at the same bank, according to the indictment. Prosecutors allege that he “challenged” this person to transfer his position to another bank, giving the Chief the opportunity to increase his position in GSX. The fall of Archegos has led to the introduction of new rules by SEC regulators, which are pushing to renew disclosures to major investors. Additional reference by Mark Vandevelde in New York