Bill Hwang Sentenced to 18 Years in Prison in Archegos Case

Archegos Capital Management founder Bill Hwang was ordered to spend 18 years in prison for fraud and market manipulation tied to the stunning 2021 collapse of his $36 billion family office, capping a case that riveted Wall Street.

Hwang, 60, was sentenced Wednesday by US District Judge Alvin Hellerstein in New York. The prison term was slightly lower than the 21 years prosecutors had sought. Hwang’s lawyers had initially asked that he be given no prison time at all.

“The amount of losses that were caused by your conduct are larger than any amount of losses I’ve dealt with as a judge,” Hellerstein said. Hwang had no visible reaction to the sentence, though he soon after briefly turned and smiled at his wife, Becky, who was sitting in the courtroom gallery.

Hwang was found guilty in July of orchestrating a scheme to mislead his bank counterparties into providing Archegos with billions of dollars in trading capacity that inflated the value of his portfolio until the bubble burst in March 2021. The implosion contributed to the demise of one of the biggest names in finance, Credit Suisse Group AG, and caused significant losses at Morgan Stanley, UBS Group AG, Nomura Holdings and other banks.

Read More: Criminal Conviction of Archegos’s Hwang, Explained

Hellerstein signaled throughout Wednesday’s hearing that he intended to impose a tough sentence on Hwang. The judge called his request for no jail “utterly ridiculous” in light of the money involved and compared Hwang to FTX founder Sam Bankman-Fried, who received a 25-year sentence for fraud.

“What was worse? Mr. Bankman-Fried’s fraud or Mr. Hwang’s fraud?” the judge asked.

In the course of the hearing, Hwang’s lawyer Dani James backed down from asking for no jail and suggested a sentence of between four and five years. She stressed his charitable work and humble lifestyle, noting that he still lives in a modest New Jersey home. But the judge expressed skepticism about Hwang’s claim of modesty, noting his “new apartment in Hudson Yards.”

Hwang himself spoke only briefly, saying he felt “deep pain” about what happened at Archegos. After thanking his wife and supporters who wrote letters seeking leniency, he asked the judge to impose a sentence that would allow him to continue to serve society.

Prosecutor Andrew Thomas argued for a stiff sentence partly on the grounds that Hwang was a repeat offender, noting his previous hedge fund, Tiger Asia, pleaded guilty to insider trading in 2012. Hellerstein said he would consider that in his sentencing and also rejected Hwang’s claims that his actions at Archegos didn’t clearly contribute to the banks’ losses.

That the victims were mainly Wall Street banks set Archegos apart from most big white collar cases. Hwang’s lawyers had planned to argue at trial that the banks were sophisticated players that understood the risks of trading with Archegos but took them in order to earn lucrative fees. Hellerstein largely sided with prosecutors in barring a “blame the victim” defense, which may be a major issue in the planned appeal of his conviction.

The jury found that Hwang directed Archegos staff to tell banks that the firm had large positions in tech giants like Apple Inc. and Microsoft Corp. In reality, its money was heavily concentrated in a small group of fairly illiquid stocks, most notably the company then known as ViacomCBS, that his trading could move. To maximize his trades’ impact, Hwang typically bought swaps, knowing that his counterparty banks would hedge by directly buying shares.

Archegos fell into a fatal spiral after a March 2021 selloff in Viacom shares prompted billions of dollars in margin calls.

The Archegos indictment was the first big white-collar case brought by Manhattan US Attorney Damian Williams after his 2021 appointment by President Joe Biden. Along with the Bankman-Fried prosecution, it was touted as a sign of a more aggressive approach to policing financial crimes. President-elect Donald Trump has said he intends to nominate former Securities and Exchange Commission Chair Jay Clayton as Williams’ successor.

Hellerstein on Wednesday put off dealing with the issue of how much Hwang must pay in restitution to his victims. Prosecutors said banks had submitted claims for more than $9 billion, though Hellerstein said there were discrepancies with figures that had been put forth earlier that needed to be addressed.

Hwang’s lawyers have argued that restitution is unjustified as well as futile, since the former billionaire now only has a net worth of around $55 million.

At trial, the defense did manage to occasionally highlight the banks’ profit motives in their dealings with Archegos. Goldman Sachs Group Inc. product specialist Nastassia Locasto testified at trial that her bank initially had questions about Archegos’ holdings but ultimately decided to trade with Hwang’s family office because it knew its Wall Street rivals were making millions in fees. “They were paying our peers,” she said.

But such testimony was overshadowed by that of two former Archegos executives who previously pleaded guilty and agreed to cooperate with the government. Former head trader William Tomita and risk head Scott Becker both said they were directed to lie to banks to persuade them to extend more credit to Archegos.

Tomita also vividly described how Hwang manipulated markets by directing his team to try to reach price targets that often changed minute by minute. Archegos used “very aggressive” algorithmic trading techniques to ensure it accounted for a very large percentage of the trading volume for the firm’s portfolio stocks, Tomita said.

When Goldman’s Locasto questioned him about why the main holders of one of Archegos’ portfolio stocks were other banks, Tomita said he lied.

“I painted this picture — this false picture — that other hedge funds were using the capacity and it wasn’t us,” he said.

Goldman was one of the few Archegos counterparties that emerged relatively unscathed, and it was revealed at trial that the bank benefited from a huge mistake Archegos made in its frantic final days. Tasked with withdrawing $470 million from its Goldman trading account, an Archegos employee actually wired that amount instead.

On Wednesday, prosecutors noted that Goldman was the sole bank out of a group of nine that wasn’t seeking restitution in the case, though it said it suffered some losses in the form of legal fees.

Former Archegos Chief Financial Officer Patrick Halligan was convicted alongside Hwang but will be sentenced separately in January.

The case is US v. Hwang, 22-cr-240, US District Court, Southern District of New York (Manhattan).