Archegos collapse was a ‘national calamity,’ prosecutor says at Bill Hwang sentencing

By Luc Cohen and Jonathan Stempel

NEW YORK (Reuters) -The collapse of Archegos Capital Management was a “national calamity,” a federal prosecutor said on Wednesday in urging a long prison sentence for the firm’s founder, former billionaire Bill Hwang.

Archegos’ March 2021 implosion took less than a week, stunning Hwang’s lenders and costing Wall Street banks more than $10 billion.

The U.S. Attorney’s office in Manhattan is seeking a 21-year prison term for Hwang, and for him to forfeit $12.35 billion and make restitution to victims.

“It stands among a rare class of cases that truly could be described as a national calamity,” prosecutor Andrew Thomas said at a sentencing hearing before U.S. District Judge Alvin Hellerstein.

A jury convicted Hwang in July on 10 criminal charges including wire fraud, securities fraud and market manipulation.

Hwang asked for no prison, forfeiture or restitution. He also wants to remain free on bail while he appeals his conviction, saying he is not a flight risk or threat to the community.

Dani James, one of his lawyers, said it was unfair for prosecutors to argue that Hwang’s failure to express remorse justified a long prison term.

“They’re upset that he’s not showing contrition and accepting responsibility even though it is his constitutional right to have a trial and to follow that trial to appeal,” James said at the hearing.

Hellerstein is expected to impose a sentence later on Wednesday.

STARTED AS FAMILY OFFICE

Hwang, 60, whose given name is Sung Kook Hwang, was a protege of late hedge-fund billionaire Julian Robertson.

He set up Archegos in New York as a family office in 2013, the year after his former hedge fund Tiger Asia Management pleaded guilty to wire fraud in an insider-trading case.

Prosecutors accused Hwang of lying to banks about Archegos’ portfolio so he could borrow money aggressively and make concentrated bets on media and technology stocks such as ViacomCBS (NASDAQ:), now called Paramount Global.

While Archegos eventually managed $36 billion, Hwang’s borrowing helped him amass $160 billion of exposure to stocks.

His downfall occurred when Hwang was unable to meet margin calls, as the prices of some of his favorite stocks began falling and various banks unloaded stocks that had backed his so-called total return swaps.

More than $100 billion of market value in Hwang’s stocks was wiped out. Several banks suffered losses, including Credit Suisse, which lost $5.5 billion, and Nomura Holdings (NYSE:). Credit Suisse is now part of UBS.

Hwang’s lawyers have argued that prosecutors did not prove his alleged lies caused losses, and that Hwang’s age, health and low risk of recidivism justified no prison time.

Their request for no punishment also cited Hwang’s Christian faith and his nonprofit Grace and Mercy Foundation, which has since 2006 donated at least $600 million to combat homelessness, poverty and human trafficking, among other causes.

Hwang’s lawyers have said his net worth has fallen to “at most” $55.3 million.

A 21-year term would be unusually long for a U.S. white-collar crime case.

It is only four years shorter than FTX cryptocurrency exchange founder Sam Bankman-Fried received in March after being convicted of stealing billions of dollars from customers. Prosecutors had sought a minimum 40-year term for Bankman-Fried.

Hwang’s co-defendant, former Archegos Chief Financial Officer Patrick Halligan, was convicted at the same trial on three criminal charges. His sentencing is scheduled for Jan. 27. Both chose not to testify at their two-month trial.