Archegos ‘duped’ Wall Street’s biggest banks, prosecutor says

Damian Williams, U.S. attorney for the Southern District of New York, speaks during a news conference in New York, on April 27.

Banks lost more than $10 billion in the collapse of the family office, prompting the departures of several senior executives and probes into the way firms monitor risk. Goldman Sachs Group Inc. and Morgan Stanley have also been sued over losses associated with the Archegos implosion.

The government alleges that Hwang and others at Archegos lied to get access to money that would help push up the value of certain stocks. “In order to get the billions of dollars that Archegos needed to sustain this massive market-manipulation scheme,” Williams said, “Hwang and his co-conspirators duped some of Wall Street’s biggest banks.”

How did they do it?

“They lied, a lot,” said Williams.

“They lied about how big Archegos’s investments had become, they lied about how much cash Archegos had on hand, they lied about the nature of the stocks that Archegos held.”

In addition, Archegos allegedly spread its business around to keep its overall position hidden. “By using various banks and brokerages for these stocks, by spreading it out, Hwang made sure that no single institution would have any idea that he was behind all of the trading,” said Williams.

Hwang pleads not guilty

Archegos Capital Management Founder Bill Hwang pleaded not guilty to fraud and other charges from the collapse of his family office, and will be freed on $100 million bail.

In his first appearance since being arrested at 6 a.m. Wednesday, Hwang agreed to fork over $5 million in cash and pledged two properties — including his personal home — to secure his bond. Wearing a face mask, green shirt and tan pants, Hwang agreed not to travel outside of the New York-New Jersey-Connecticut area. Hwang told prosecutors that he lost his passport, so his wife will surrender her passport instead.

His co-defendant, Chief Financial Officer Patrick Halligan, also pleaded not guilty and will be freed on $1 million bail and have limited travel. Both men will be released Wednesday. They are due back in court in lower Manhattan on May 19.

The two were charged with 11 criminal counts, including racketeering conspiracy, market manipulation, wire fraud and securities fraud, according to a statement from Manhattan U.S. Attorney Damian Williams.

The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission also filed related civil complaints.

The size of the bail matches some of the more high-profile white-collar cases of the past year. Trump ally Tom Barrack was freed from jail for $250 million and Nikola Corp. founder Trevor Milton was released for $100 million. While those levels are high, the highest U.S. bail is believed to be $3 billion, set in 2003 by a Texas judge for real estate heir Robert Durst, after he already jumped bail once. An appeals court later slashed the amount to $450,000.

In addition, Galleon Group LLC’s Raj Rajaratnam was freed on $100 million bail in 2009 and junk bond king Michael Milken faced a quarter-billion dollar demand in 1989. Bernie Madoff’s bail was set at $10 million and he struggled to meet it, unable to find four people to co-sign for him.