Bill Hwang (not to be confused with the Nvidia Huang’s), once the mastermind behind Archegos Capital Management, now has a new title: inmate. On Wednesday, the 60-year-old former billionaire was sentenced to 18 years in prison for orchestrating one of the most catastrophic financial collapses in recent memory. While prosecutors were gunning for 21 years, they’ll have to settle for this slightly reduced sentence—not that Hwang’s lawyers are happy about it, considering they were hoping for zero jail time.  

(Source: Giphy) 

In short, Hwang’s downfall began with Archegos, his family office that managed to blow up spectacularly in March 2021. Using $36 billion in assets, Hwang leveraged his portfolio up to a staggering $160 billion by convincing banks to lend him obscene amounts of money. The problem? He got caught doing something Wall Street never does in the first place: Being honest. 

(Source: Bloomberg) 

Hwang’s scheme involved lying to major financial institutions, claiming Archegos held diversified investments in tech giants like Apple and Microsoft. In reality, most of the portfolio was tied up in a small handful of illiquid stocks, such as ViacomCBS (now Paramount Global). To make matters worse, he used swaps (when you hear swaps think sh*t)--a.k.a financial smoke and mirrors—that allowed him to amplify his positions without raising red flags. When Viacom’s stock tanked, the whole house of cards blew up in his face. 

As you can imagine, the fallout was more than epic. Archegos’ implosion wiped out over $100 billion in market value and left Wall Street banks holding the bag. Credit Suisse alone lost $5.5 billion, with Morgan Stanley, UBS, and Nomura also taking massive hits. Credit Suisse’s pain became so bad that it’s now part of UBS, having been swallowed up in a fire sale.

(Source: Bloomberg) 

Judge Alvin Hellerstein didn’t hold back during sentencing, calling Hwang’s actions responsible for “the largest financial losses I’ve ever seen.” He also casually compared Hwang to another freshly convicted fraudster, Sam Bankman-Fried of FTX infamy, asking, “What was worse? Mr. Bankman-Fried’s fraud or Mr. Hwang’s fraud?” Savage.

On the other hand, Hwang’s legal defense was, let’s say, wishful thinking. His lawyers initially argued for no prison time, citing his Christian faith, a supposed “humble” lifestyle, and his history of charitable donations (over $600 million through his Grace and Mercy Foundation). They even tried to downplay his crimes by throwing shade at SBF, insisting, “At least he wasn’t stealing from customers.” Yes they legit said that, which is like the same thing as saying “Sure I killed him, but at least I didn’t eat ‘em” 

(Source: Giphy) 

BUUUT, the judge wasn’t buying it, especially after prosecutors pointed out that Hwang was a repeat offender. His earlier hedge fund, Tiger Asia, pleaded guilty to insider trading back in 2012. Oh, and that “humble” lifestyle I mentioned? It turns out Hwang owns a massive new apartment in Hudson Yards, which doesn’t exactly scream modest to the judge who’s making a mere fraction of Hwang’s net worth.

What’s more is that the trial also featured damning testimony from former Archegos executives who flipped on Hwang (a.k.a. Snitches who’ll need stitches later). They detailed how he manipulated stock prices and directed employees to lie to banks about Archegos’ exposure. One trader described painting a “false picture” of Archegos’ holdings to keep the loans flowing.

(Source: Giphy) 

Goldman Sachs, (who is notoriously known for getting in the middle of all kinds of clusterf**ks) managed to escape Archegos relatively unscathed, even benefited from a colossal mistake in the fund’s final days. Instead of withdrawing $470 million from Goldman, an Archegos employee accidentally wired the money to Goldman LOL. 

Now of course, while Hwang’s 18-year sentence is a rarity in the world of white-collar crime, this nail in the coffin isn’t hammered in yet. The court still has to decide how many billions in restitution Hwang owes his victims—though his lawyers argue it’s a moot point since his net worth has apparently dwindled to a measly $55 million. Only $55 million?! Said no one ever. 

(Source: Fortune) 

Hwang’s co-defendant, former CFO Patrick Halligan, is also awaiting sentencing, scheduled for January. Meanwhile, Hwang’s legal team is already gearing up for an appeal, likely arguing that banks knew exactly what they were getting into by dealing with Archegos. Spoiler: That defense didn’t work the first time. In the end though, Bill Hwang’s career and freedom just got clapped, and now with 18 years behind bars ahead of him (hoping he gets a cell with Diddy and SBF), he’ll have time to reflect on what actor he wants portraying him in Netflix’s next hit docuseries. Where, I’m sure he’ll get a cut of too.

So yeah, the moral of the story?  Don’t be rich with terrible honesty problems—especially when all your wealth is built on other people's money. In the meantime, be careful with who you give your money to–because,  while they may be all sunshine and rainbows to your face, their inner greed, lies, and leverage could end up obliterating your mountain of dreams in one go. 

As always, stay safe and stay frosty, friends! Until next time… 

P.S. I’ll be honest, I’m not one to overhype things, but here’s the deal: The next alert we’ll be dropping this week? It’s a game-changer. And if you miss out, well, it could be costly. Click here ASAP for the details. 

Stocks.News holds positions in Netflix, Apple, and Microsoft as mentioned in the article.