By Sung Kook “Bill” Hwang, once a prominent figure in the financial world, received an 18-year prison sentence on Wednesday for his role in the spectacular collapse of Archegos Capital Management.
The implosion sent shockwaves through Wall Street, leaving major banks reeling from over $10 billion in losses.
US District Judge Alvin Hellerstein in Manhattan delivered the sentence after a jury found Hwang guilty on 10 criminal charges in July, including wire fraud, securities fraud, and market manipulation.
A financial calamity of unprecedented scale
Judge Hellerstein underscored the gravity of Hwang’s actions, stating, “The amount of losses that were caused by your conduct are larger than any other losses I have dealt with.”
Prosecutor Andrew Thomas echoed this sentiment during the sentencing hearing, describing the Archegos collapse as “a national calamity.”
The prosecution had sought a 21-year prison term for Hwang—an unusually lengthy sentence for a white-collar crime—along with $12.35 billion in forfeiture and restitution to victims.
A decision on these financial penalties is expected to be reached on Thursday.
Comparing Hwang’s case to the FTX debacle
Before handing down the sentence, Judge Hellerstein drew a parallel between Hwang’s case and that of Sam Bankman-Fried, the disgraced founder of the FTX cryptocurrency exchange.
Bankman-Fried received a 25-year sentence in March for stealing $8 billion from FTX users.
Hwang’s lawyer, Dani James, argued that the two cases were fundamentally different, stating, “Mr. Bankman-Fried was literally stealing from his customers. I don’t think that’s what’s happened here.”
Hwang’s plea for leniency and the prosecution’s counterarguments
Hwang’s legal team had requested no prison time, forfeiture, or restitution, arguing for his release on bail pending appeal.
They emphasized his low risk of reoffending and the positive impact of his philanthropic endeavors through the Grace and Mercy Foundation.
James asserted, “The notion that he would commit a crime in the future, it’s just not so.”
However, the prosecution’s push for a substantial sentence reflects the devastating financial consequences of Hwang’s actions.
From Tiger Asia to Archegos: a history of financial maneuvering
Hwang’s career began under the mentorship of hedge-fund legend Julian Robertson.
After his previous hedge fund, Tiger Asia Management, pleaded guilty to wire fraud in an insider trading case in 2012, Hwang established Archegos as a family office in 2013.
Prosecutors alleged that Hwang deceived banks about Archegos’s portfolio to secure excessive loans, which he then used to make highly concentrated bets on media and technology stocks.
The implosion: margin calls and a $100 billion wipeout
Although Archegos managed $36 billion, Hwang’s leveraged positions exposed him to a staggering $160 billion in stock market risk.
When the prices of his favored stocks began to decline, he was unable to meet margin calls.
Banks, scrambling to mitigate their losses, began unloading the stocks backing Hwang’s total return swaps, leading to a market value wipeout of more than $100 billion.
Credit Suisse suffered a $5.5 billion loss, and Nomura Holdings also incurred significant losses.
Credit Suisse is now a part of UBS.
Awaiting the final chapter
While Hwang expressed remorse and a desire to make amends in his statement to the court, the judge’s decision on forfeiture and restitution will determine the full extent of the financial consequences he faces.
Hwang’s lawyers have stated that his net worth has dwindled to “at most” $55.3 million.
His co-defendant, former Archegos CFO Patrick Halligan, who was also convicted at trial, awaits sentencing scheduled for January 27.
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