Federal prosecutors are seeking a 21-year prison sentence for Bill Hwang, the founder of Archegos Capital Management, after his conviction in July on charges of orchestrating a massive market manipulation scheme. The collapse of Hwang’s firm in March 2021 erased $36 billion in value and inflicted over $10 billion in losses on its lenders.
Hwang, 60, is set to appear in Manhattan federal court for sentencing on November 20, a pivotal moment in a legal saga that has shed light on the risky and opaque practices underpinning his once-massive investment empire.
At the height of its operations, Archegos Capital Management controlled $160 billion in stock market exposure, despite managing only a fraction of that in actual assets. The firm employed total return swaps, complex financial derivatives, to amass highly leveraged positions in companies like ViacomCBS and Discovery.
Prosecutors argued that Hwang misrepresented the nature of Archegos’ portfolio to banks, enabling him to borrow substantial sums and place high-risk bets on a small number of stocks. When stock prices fell and margin calls went unmet, the firm collapsed in a spectacular fashion, forcing banks to sell off collateral stocks at significant losses.
Credit Suisse, now part of UBS, and Nomura Holdings were among the hardest hit, suffering billions in losses as they unwound Archegos’ positions. The incident not only destabilized financial markets temporarily but also prompted calls for regulatory scrutiny of derivatives trading and transparency in family office operations.
In July, a jury found Hwang guilty on ten counts, including securities fraud, wire fraud, and racketeering conspiracy. Prosecutors described his actions as a deliberate scheme to manipulate the market and deceive banks.
Hwang’s co-defendant, Patrick Halligan, the former Chief Financial Officer of Archegos, was also convicted on three related charges. Halligan’s sentencing is scheduled for January 27, 2025.
During the trial, prosecutors painted a picture of Hwang as a man who recklessly leveraged his financial power while obscuring risks from his lenders. “The evidence showed that Mr. Hwang repeatedly and knowingly misled banks about the state of Archegos’ portfolio to secure more credit,” said U.S. Attorney Damian Williams in a statement following the conviction.
In court filings made public on Friday, federal prosecutors asked U.S. District Judge Lewis Liman to impose a 21-year prison sentence on Hwang. They characterized his crimes as a “breathtaking display of greed and deception” that warranted a strong punitive measure.
“Bill Hwang’s actions directly led to catastrophic losses for financial institutions and harmed public confidence in the integrity of our markets,” prosecutors argued. “A significant prison term is essential to deter others from engaging in similar schemes.”
Hwang’s legal team countered with a plea for leniency, urging the court to impose no prison time. They argued that prosecutors failed to prove Hwang’s alleged misstatements caused the banks’ losses.
In their November 8 filing, defense attorneys highlighted mitigating factors, including Hwang’s age, health concerns, and philanthropic efforts. They also cited his low likelihood of reoffending, asserting that his actions, though severe, were uncharacteristic.
“Bill Hwang is a deeply religious man who has dedicated substantial time and resources to charitable causes,” the defense wrote. “He does not pose a continuing risk to society.”
Hwang, who did not testify during his trial, is expected to appeal his conviction. His defense has hinted at plans to challenge both the jury’s findings and procedural aspects of the trial.
The collapse of Archegos was a wake-up call for Wall Street, highlighting the dangers of excessive leverage and insufficient oversight of family offices—private investment firms managing the wealth of individuals or families.
The U.S. Securities and Exchange Commission (SEC) and other regulators have since proposed measures aimed at increasing transparency around the use of derivatives like total return swaps. Critics argue that such financial instruments, when used irresponsibly, can magnify systemic risks.
“Archegos exploited gaps in the regulatory framework to build an empire on shaky foundations,” said financial analyst Margaret Liu. “Its downfall was not just a blow to its lenders but a warning to the entire industry about the perils of unchecked risk-taking.”
Hwang’s sentencing is being closely watched by legal and financial communities, as it will set a precedent for how courts handle similar cases in the future.
Experts note that the 21-year recommendation aligns with federal sentencing guidelines for the crimes Hwang committed but exceeds the typical sentence for financial fraud. By comparison, Bernie Madoff, who orchestrated the largest Ponzi scheme in history, was sentenced to 150 years, while Allen Stanford, convicted in a $7 billion investment fraud, received 110 years.
“The severity of the recommended sentence underscores the government’s desire to send a strong deterrent message,” said legal scholar Daniel Waters. “But the judge will also weigh mitigating factors, including Hwang’s personal circumstances and the argument that banks willingly participated in high-risk activities.”
Hwang’s co-defendant, Patrick Halligan, played a central role in managing Archegos’ finances and has also been found guilty of criminal charges. Prosecutors described him as complicit in the scheme, although his involvement was viewed as secondary to Hwang’s.
Halligan’s sentencing in January 2025 will likely take into account his cooperation during the investigation and trial. While prosecutors have not yet made a specific sentencing recommendation for Halligan, his attorneys are expected to argue for a significantly reduced term, citing his lesser culpability and other mitigating factors.
Credit Suisse, one of Archegos’ primary lenders, suffered a $5.5 billion loss as a result of the collapse, marking one of the largest trading debacles in its history. The fallout hastened the bank’s decline, culminating in its acquisition by UBS in 2023.
Nomura Holdings, another major lender, reported $2.9 billion in losses linked to Archegos. Both institutions have since faced lawsuits and regulatory investigations, as well as internal scrutiny of their risk management practices. The Archegos saga has intensified calls for stricter banking oversight, particularly regarding lending to non-traditional entities like family offices.
