Evangelical billionaire Bill Hwang could spend his life in prison

Bill Hwang
Archegos Capital Management owner Bill Hwang leaves Manhattan federal court on April 27, 2022 in New York City. Hwang, along with his former chief financial officer, Patrick Halligan, pleaded not guilty after being charged with 11 counts of racketeering and securities fraud. Hwang was released on 0 million bail. |

Bill Hwang, founder of the more than $10 billion investment firm Archegos Capital Management, who was once revered as one of the biggest benefactors in the evangelical world, could spend the rest of his life in prison after being arrested and charged last Wednesday with racketeering conspiracy, securities fraud and electronic fraud.

The charges stem from a number of interrelated schemes to illegally manipulate the prices of publicly traded securities in Archegos’ portfolio, the US Department of Justice said. Prosecutors say these schemes have caused billions of dollars in losses to major global investment banks, brokerage houses and investors.

Archegos operated as a private hedge fund, also known as a “family office”. Unlike other large hedge funds, Archegos was not required to provide regulators with information about its holdings and debt that could have shed light on fraud and averted the crisis, prosecutors say.

“Today’s announcement demonstrates the department’s unwavering commitment to holding accountable those who distort and defraud our financial markets, including those who occupy Suite C,” said Lisa O. Monaco, Deputy Attorney General of the Southern District of New York, in a press release. . “That’s especially true for this kind of crime – one that leaves a financial crater in its wake.”

Hwang and his chief financial officer, Patrick Halligan, pleaded not guilty in Manhattan federal court on April 27, The Wall Street Journal reported. Hwang was released on $100 million bail, while Halligan was released on $1 million bail.

Lawrence Lustberg, an attorney for Hwang, told The New York Times that the allegations against his client are “overblown” and that the indictment “has absolutely no factual or legal basis.” He said Hwang was “completely innocent of any wrongdoing”.

Mary Mulligan, an attorney for Halligan, also told the outlet that her client “is innocent and will be exonerated.”

Federal prosecutors said two other Archegos employees, William Tomita, who was the company’s chief trader, and Scott Becker, who was its chief risk officer, pleaded guilty to their role in the schemes and are currently cooperating with the government.

According to the indictment, Hwang, along with Halligan, Becker and Tomita, lied to the banks to obtain billions of dollars which they then used to artificially inflate the stock prices of a number of companies listed in stock Exchange. They would have invested in stocks mainly through special contracts with banks and brokers called “swaps”.

The exchanges allowed Hwang “to induce massive purchases of certain stocks, including on carefully selected days and times, which artificially inflated stock prices,” the Justice Department statement said.

Hwang and his team are accused of lying to banks and using a series of manipulative trading techniques to keep those stock prices high and keep them from falling. Within a year, Hwang artificially increased the value of a portfolio from $1.5 billion to $35 billion.

“We allege that these defendants and their co-conspirators lied to the banks to obtain billions of dollars which they then used to inflate the stock prices of a number of publicly traded companies,” said Damian Williams, American attorney for the Southern District of New York. , said in a statement.

“Lies fueled inflation, and inflation led to more lies. It was spinning and spinning. Within a year, Hwang reportedly turned a $1.5 billion wallet and turned it into a wallet. $35 billion. But last year, the music stopped. The bubble burst. Prices went down. And when they did, billions of dollars of capital evaporated almost overnight. the following day.

Federal prosecutors said that within days, companies at the center of the Archegos trading system had lost more than $100 billion in market capitalization. Archegos owed billions of dollars more than it had on hand, and Archegos collapsed.

Investors who bought the affected stocks at artificial prices also lost the value they thought they held from their investments, and banks lost billions of dollars. Archegos employees, many of whom had to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars, according to federal prosecutors.

Chinese companies listed in the United States were among Archegos’ largest positions, the Wall Street Journal notes, adding that stocks manipulated included ViacomCBS, Discovery Inc., now known as Warner Bros. Discovery Inc., GSX Techedu Inc., now known as Gaotu Techedu Inc., Chinese internet search company Baidu Inc. and online retailer Farfetch Ltd.

Archegos had positions of more than $10 billion in GSX, Baidu and Tencent Music Entertainment Group, and more than $20 billion in ViacomCBS at the end of March 2021, according to the indictment.

According to the Wall Street Journal, criminal lawsuits like the one brought against Hwang for “open market” stock manipulation based on legitimate trades are unusual and difficult to win.

The publication cited the 1980s insider trading scandal involving Ivan Boesky when his associate, John Mulheren, was charged with manipulating shares of Gulf & Western Industries Inc. Those charges were overturned on appeal.

“There haven’t been many of these cases,” Harvey Pitt, a former SEC chairman who represented Boesky, told the WSJ. “They are not easy to win.”

This is not the first time Hwang, 58, whose father was a pastor and mother served as a missionary in Mexico, has faced criminal charges.

He previously ran a successful fund called Tiger Asia Management until he was forced to shut it down in 2012 after pleading guilty to insider trading in federal court. He and his companies paid $44 million to settle civil and criminal charges of manipulating Chinese stocks. His fund also lost about $16 million in related profits.

In recent years, Hwang, who co-founded the Grace and Mercy Foundation, has been a contributor to Focus on the Family and a trustee of Fuller Theology Seminary. He was one of the greatest benefactors in the evangelical world.

“I can’t think of another foundation or person who has made significant donations to as many Christian organizations as he has,” said Warren Cole Smith, who heads an organization called MinistryWatch, which monitors the finances of Christian ministries, at the Washington Post.

Through his Grace & Mercy Foundation launched in 2006, which he directs with his wife, Becky, and funds almost entirely, Hwang has awarded some $79.1 million in grants to dozens of primarily Christian organizations, IRS 990 forms filed through the end of 2018 show. In total, he gave some $591 million to the foundation, Forbes reported.

The Fuller Foundation and the Fuller Theological Seminary in Pasadena, Calif., where Hwang serves on the board, received a total of $14 million, making him one of the foundation’s largest recipients.

Since 2016, the Museum of the Bible in Washington, DC, has received $2.4 million while millions have gone to Christian humanitarian charities, such as Hope for New York and the Bowery Mission.

Tim Keller’s Redeemer Presbyterian Church, the Brooklyn Tabernacle megachurch, The King’s College Christian liberal arts school, and other churches and mission organizations nationwide have also been blessed by Hwang’s philanthropy.

Ravi Zacharias International Ministries, whose late founder Ravi Zacharias was charged with multiple sexual misconduct and assault cases, also received $3.3 million.

Hwang faces one count of racketeering conspiracy, which carries a maximum sentence of 20 years, multiple counts of securities fraud, wire fraud and market manipulation, which result in a maximum sentence of 20 years in prison for each count.

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Barry F. Howard