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NEW YORK (Reuters) – Federal prosecutors on Wednesday charged Archegos Capital Management founder Bill Hwang with 11 criminal counts and the private investment firm’s former chief financial officer, Patrick Halligan, with three counts over Archegos’ collapse a year ago.
Hwang and Halligan pleaded not guilty in Manhattan federal court on Wednesday.
WHAT ARE THEY ACCUSED OF DOING?
Authorities allege Hwang and Halligan lied to banks in order to increase Archegos’ credit lines and use the borrowed money to manipulate the stock prices of companies in the $36 billion family office’s portfolio including Viacom, Discovery (NASDAQ:WBD) and Tencent Music Entertainment.
When Archegos collapsed in March 2021, global banks lost around $10 billion.
WHAT ARE THE SPECIFIC CHARGES?
Hwang faces charges of racketeering, securities fraud, securities fraud of counterparties and wire fraud along with seven counts of market manipulation. Halligan is charged with racketeering, wire fraud and securities fraud of counterparties.
WHAT DO RACKETEERING AND MARKET MANIPULATION INVOLVE?
The Department of Justice said Hwang and Halligan committed racketeering conspiracy in which they set up an illegal scheme for profit.
The market manipulation charges against Hwang alleged that he engaged in or directed transactions in securities and securities-based swaps to raise or lower their prices and induce others to purchase those securities.
WHAT DO THE FRAUD CHARGES ENTAIL?
Prosecutors alleged the Archegos founder engaged in a securities fraud scheme to build positions in numerous stocks and manipulate their prices.
Hwang and Halligan were both charged with securities fraud of counterparties. Prosecutors contend they lied to multiple banks about Archegos’ assets in order to obtain more loans that funded ever larger positions and kept the securities’ prices inflated.
The two men were also charged with wire fraud of counterparties. Wire fraud refers to fraud involving online and telecommunications networks.
These charges claim they made false and misleading statements through these means to defraud Archegos’ trading counterparties.
