Bill Hwang: Where Is He Now?

Steve Jobs, the brilliant mind behind Apple, was fired from the company in 1985. He returned in 1997 to transform the world with iPods, iPhones, and iPads.

Jeff Bezos’s Amazon teetered on the brink of collapse during the dot com crash in 2000. Amazon stock dropped more than 80 percent that year, but the company recovered and now has a market cap of more than a trillion dollars.

Investors like Cathie Wood of the ARK Invest family of funds and Bill Hwang, who provided seed capital for the launch of ARK Invest’s first four ETFs, play a critical role in the process of innovation by funding next-generation ventures.

Wood’s ARK Invest ETFs put cash into Tesla before its meteoric rise in 2020, and ARK funds saw tremendous gains as a result. Early investors like Hwang built fortunes from these types of bets.

Unfortunately, not every story of innovation and risk-taking ends happily – particularly when there is a disregard for regulations. That was made all too clear in November 2022 when the crypto exchange FTX went bankrupt.

Hwang’s story is eerily similar to the FTX disaster in that brilliant minds bent and broke the rules to build wealth. Eventually, the shaky foundation upon which those fortunes were built collapsed – and took their leaders down with them.

Who is Bill Hwang, and what caused his firm, Archegos, to collapse in such a spectacular manner? What is Bill Hwang charged with, and where is he now?

Who Is Archegos Fund Manager Bill Hwang?

Sung Kook Hwang, better known as Bill Hwang, was born in South Korea and immigrated to the United States in 1982. He was immediately attracted to the excitement of investing, and he held several positions in reputable firms before meeting hedge fund manager Julian Robertson – the famed founder of Tiger Management.

Hwang began working for Robertson, and when Tiger Management was dissolved in 2000, Hwang was selected to be one of Robertson’s “Tiger Cubs.” Robertson gave Hwang $25 million to start his own hedge fund. In less than a decade, Hwang’s fund was managing more than $8 billion in assets. Returns averaged 40 percent per year.

The success didn’t last, and Hwang’s fund was forced to close in 2012 after running afoul of the law in both the United States and Hong Kong. Hwang eventually paid out $44 million to settle US charges that he participated in insider trading.

Needless to say, Bill Hwang wasn’t a quitter, and he developed a new plan to stay relevant in the world of investing. In 2013, Hwang opened a family office, which is subject to less regulation. He named the new firm Archegos Capital Management.

What Caused Archegos Collapse?

Bill Hwang’s Archegos Capital Management recreated Hwang’s early successes, and he rapidly accumulated tremendous wealth. This time, he stayed under the radar, and even the Fortune billionaire trackers didn’t realize Bill Hwang’s net worth exceeded $10 billion.

After the trouble in 2012, Hwang was banned from trading in Hong Kong, so he moved his focus to the US market – particularly Silicon Valley-based tech companies. He became fascinated with Netflix just as the company started its transition to streaming, and he was convinced that Netflix’s innovative new method of delivering entertainment would overtake traditional television, cable, and video services.

As it turned out, Hwang was right about Netflix, and he was in the right position at the right time for other tech companies, as well. His portfolio included social media giant LinkedIn and the e-commerce/cloud computing behemoth Amazon. His gains on these profitable trades put his net worth in the billions. Then everything went wrong. Over the course of four days in March 2021, the entire firm collapsed. Along with it went Hwang’s $10 billion net worth and roughly $100 billion in shareholder value.

The scheme, according to the US attorney’s office, was complex, and that allowed it to go on for quite some time without being noticed. In simple terms,

Hwang used obscure financial instruments called total return swaps that offer similar risks and rewards as owning stock without actually requiring the investor to own stock. Hwang made transactions with multiple banks to keep the size and scope of his maneuvering secret. This enabled him to borrow more money and use it to make bigger bets.

Part of the plan involved bringing other investors on board to pump up the price of the stock. Higher stock prices gave Hwang greater borrowing power, so he could bet more and push the stock prices up further. In other words, he manipulated the market. That’s the sort of cycle that gets out of control rapidly, and it is always unsustainable.

In March 2021, a handful of the stocks in Archegos’s portfolio suddenly lost value, which led to margin calls – lenders wanted their loans repaid. Archegos couldn’t come up with the cash, and the lenders responded by seizing and selling the related collateral. The scheme unraveled in a matter of days, leaving Hwang and his investors with empty portfolios.

The fallout from Bill Hwang’s alleged illegal trading practices and the collapse of Archegos Capital Management is still being felt. In April 2022, Hwang and Archegos’s Chief Financial Officer Patrick Halligan were arrested and charged with multiple crimes, including securities fraud, wire fraud, and racketeering conspiracy. Archegos’s head trader, William Tomita, and its Chief Risk Officer, Scott Becker, were also charged.

All of the banks Hwang dealt with lost money, but it is worth noting that Credit Suisse was hardest-hit at more than $5 billion in losses. Senior leaders at Credit Suisse lost their jobs over the error in judgment, and it was the beginning of the end for the large institution. In March 2023, Credit Suisse collapsed entirely and was taken over by UBS.

Where Is Bill Hwang Now?

Today, Bill Hwang lives in New Jersey and is waiting for his trial to begin. It is currently scheduled for October 2023. Hwang entered a not guilty plea, as did CFO Patrick Halligan, but they may have a difficult defense ahead of them. William Tomita and Scott Becker agreed to plead guilty in exchange for their testimony against Hwang and Halligan.

Most recently, Hwang requested to subpoena documents from ten banks. His legal team appears to be attempting to move blame to counterparties, who he said “played a pivotal role” in the failure of Archegos.

Plaintiffs accuse the former Archegos head of significant borrowing to fund return swaps that in turn resulted in exposure to various stocks with amounts totaling as much as $160 billion. Significantly, prosecutors claim that the borrowing risks were concealed by tapping into debt from a variety of banks.

When the stocks to which it was exposed fell, Archegos ran aground following a series of margin calls. A domino effect propagated whereby banks sold the stocks that were used as collateral for swaps.

In October, the trial will begin to adjudicate on Bill Hwang’s guilt or innocence.

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