The owner of a New York-based hedge fund that collapsed when it defaulted on margin calls has been arrested on charges alleging he defrauded leading global investment banks and brokerages
NEW YORK — — The owner of a New York-based hedge fund that collapsed when it defaulted on margin calls was arrested Wednesday on charges alleging he defrauded leading global investment banks and brokerages of billions of dollars by telling them lies so his private investment firm could grow its portfolio from $10 billion to $160 billion.
He hid the extent of his market prowess from investors by using derivative securities that had no public disclosure requirement, it said. It said the schemes also caused millions of dollars in losses for innocent Archegos employees who had been required to allocate to the firm a substantial amount of their pay as deferred compensation.
“We allege that Hwang and Archegos propped up a $36 billion house of cards by engaging in a constant cycle of manipulative trading, lying to banks to obtain additional capacity, and then using that capacity to engage in still more manipulative trading,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement.
“A prosecution of this type, for open-market transactions, is unprecedented and threatens all investors,” he said in a written statement. “As you will see when the facts unfold, Bill Hwang is entirely innocent of any wrongdoing; there is no evidence whatsoever that he committed any kind of crime, let alone the overblown allegations that pervade this indictment.”
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