The founder of Archegos Capital Management was indicted on fraud charges Wednesday, a little over a year after his company’s implosion caused billions of dollars of losses on Wall Street, Courthouse News Service reports. “The scale of the trading was stunning,” said U.S. Attorney Damian Williams for the Southern District of New York announcing the arrest of Sung Kook “Bill” Hwang and Patrick Halligan, who served as the founder and chief financial officer, respectively of Archegos. Hwang, 58, and Halligan, 45, are both charged with conspiracy to violate federal anti-racketeering law, securities fraud and wire fraud in relation to an alleged scheme to manipulate public stocks. Prosecutors allege that they propped up the value of Archegos from $1.5 billion to $35 billion in only a year’s time. They allegedly were able to do this by lying to counterparts of Archegos to get increased trading capacity so the company could buy stocks in their most concentrated form, driving up the price.
The fraud largely flew under the radar, prosecutors say, because Hwang ran Archegos as a private firm taking care of his family’s fortune, evading the regulations other hedge funds face. Archegos collapsed last March after creating their large portfolio of stocks on borrowed money, which triggered margin calls that the company could not meet, causing banks, like Credit Suisse, to lose at least $10 billion. Hwang has had a run-in with federal authorities previously, reaching a civil settlement with regulators in 2012 regarding an insider-trading investigation of his former hedge fund. In that case, Hwang paid $44 million in fines. Both Hwang and Halligan face a maximum 20-year sentence for each charge. Scott Becker, the former chief risk officer at Archegos, and William Tomita, the firm’s former top trader, were also listed as defendants in the SEC complaint and have pleaded guilty to criminal charges.