Hundreds of Billions Dollar 'Margin Call' Bill Hwang Trial Begins: "Fraud or Investment?"

Prosecutors Allege Mr. Hwang's Market Manipulation and Bank Asset Misappropriation
Archegos Bankruptcy Causes $100 Billion Loss for Company and Shareholders
Defense Claims "Value Investing Based on Conviction"

The trial for fraud charges against Bill Hwang, a Korean-American investor who plunged Wall Street into chaos with a margin call crisis worth hundreds of billions of dollars, has entered full-scale proceedings, Bloomberg reported on the 13th (local time). Prosecutors allege that Hwang manipulated the market and embezzled bank assets.

According to the report, Alexandra Rossman, a U.S. federal prosecutor, stated in court, "The bankruptcy of Archegos, founded by Hwang, caused companies and shareholders included in the portfolio to suffer losses exceeding $100 billion," adding, "Hwang deceived banks and inflated stock prices on a 'house of cards' built on manipulation and lies to become a Wall Street legend."

[Image source=AP Yonhap News]

She continued, "The corrupt core group within Archegos did anything using lies and deception if instructed by Hwang," identifying Patrick Halligan, former CFO of Archegos, as an accomplice in the fraud. Both Hwang and Halligan plead not guilty.

Earlier, the U.S. Attorney's Office for the Southern District of New York indicted Hwang, founder of Archegos Capital Management, in April 2022 on charges including fraud. The allegations state that Hwang deceived financial firms to borrow large sums and then artificially manipulated stock prices by investing in derivatives of stocks he held.

In March 2021, Hwang borrowed massive funds from Wall Street banks and invested over $50 billion (approximately 63 trillion won), more than five times his assets, in derivatives such as total return swaps (TRS) and contracts for difference (CFD). When the prices of related underlying assets like stocks sharply declined, margin calls requiring additional collateral payments occurred, and the lending investment banks sold the collateral stocks in block deals, spreading the losses.

The losses incurred by the investment banks related to the Archegos margin call crisis reached $10 billion (approximately 13.6 trillion won). Among them, Credit Suisse (CS), which suffered damages amounting to $5.5 billion, was eventually acquired by its domestic competitor UBS due to the shock.

On the other hand, Hwang's side has strongly denied the prosecution's claims. Barry Berke, Hwang's attorney, argued, "He had courage and conviction in his investments," and "He was a value investor who believed in the value of his investment items, not someone who planned fraud or stock manipulation." He also explained, "Hwang invested with his own money, not clients' funds," and "he is far from extravagant, frequently making charitable donations through the foundation he established."

Hwang faces about ten charges, including conspiracy to extort with Halligan. Each charge carries a maximum sentence of 20 years, so under the U.S. system of consecutive sentencing, a life sentence exceeding 100 years is possible. However, major foreign media have reported that it may not be easy for prosecutors to prove Hwang's charges.

This content was produced with the assistance of AI translation services.