The aftermath of the explosive Chinese concept stocks: "Generation Tycoon" Bill Hwang sentenced to 18 years in prison

Once Bloodied Chinese Concept Stocks in Three Days, causing the market value of Baidu, Tencent Music, Vipshop, and others to evaporate by over $30 billion, Bill Hwang cannot escape prison this time.

On Wednesday local time, Bill Hwang, founder of Archegos Capital, was sentenced to 18 years in prison for manipulating stock prices and defrauding banks.

According to the indictment, Bill Hwang deceived banks to obtain favorable financing and manipulated the stock market to his advantage through lies and manipulative trading strategies. These actions increased the assets managed by Archegos Capital from $4 billion to $36 billion in less than six months, until Archegos Capital collapsed.

The collapse of Archegos Capital led to a $100 billion evaporation in market value, resulting in approximately $10 billion in losses for several Wall Street banks that funded it, including Morgan Stanley, UBS, Credit Suisse, and Nomura. Among them, Credit Suisse incurred about $5 billion in losses, forcing the bank to sell itself to competitor UBS in 2023.

At the hearing in Manhattan federal court, Bill Hwang's lawyer objected to many points in the "sentencing report," arguing that Mr. Hwang loved the stocks he invested in, which led him to increase his investments, and he never intended to deceive the banks providing funding, asserting that Mr. Hwang's trading instructions were legal.

However, Judge Alvin Hellerstein, who presided over the trial, rejected most of the objections. Hellerstein stated, the sentence must reflect the seriousness of the events, and the losses caused by Bill Hwang's actions are greater than any losses I have dealt with as a judge.

Initially, Bill Hwang's lawyer requested no prison time, which the judge dismissed, stating that "requesting a zero sentence is absurd." The lawyer then argued that a sentence of three to six years would be appropriate.

Currently, Bill Hwang plans to appeal, expressing regret for the losses suffered by employees and banks: "I am very sorry for what happened."

Some investors mocked on social media, stating that Bill Hwang's fatal mistake was attempting to manipulate (price control) real American stocks; if he had manipulated fictional cryptocurrencies, it would not only be legal but could also attract greater social attention.

Wall Street Banks Suffer Severe Losses

The uniqueness of this case lies in the fact that the victims are primarily Wall Street banks.

Archegos Capital, founded by Bill Hwang, borrowed funds from Wall Street banks for large-scale stock investments, but since this institution was a family office primarily managing Bill Hwang's family funds, it was not subject to much regulation In the spring of 2021, the stocks heavily concentrated by Bill Hwang experienced a significant decline. Archegos Capital used borrowed funds to mask the company's enormous risk exposure and invested in the same few stocks across multiple banks.

The jury found that Bill Hwang misled the banks by claiming that Archegos Capital held substantial shares in tech giants like Apple and Microsoft, while in reality, Archegos Capital concentrated its investments in a few illiquid stocks, such as ViacomCBS.

These lending banks stated that they were unaware of the trades Archegos Capital was making with other banks.

These losses spread to the banks that funded Archegos Capital, resulting in approximately $10 billion in massive losses for these banks, including Morgan Stanley, UBS, Credit Suisse, and Nomura Securities.

However, Bill Hwang's lawyer argued that these banks voluntarily took on the risk in exchange for hefty fees, but Judge Hellerstein barred the lawyers from using a "blame the victim" defense.

U.S. Assistant Attorney Andrew Thomas told Judge Hellerstein that Bill Hwang's fraudulent behavior was "widespread, not incidental."

Thomas referred to Mr. Hwang as a "recidivist," noting that Bill Hwang's previous hedge fund, Tiger Asia Management, reached a settlement with the Securities and Exchange Commission (SEC) in 2012 to resolve insider trading allegations, which prohibited Bill Hwang from managing client funds in the U.S. and resulted in a $44 million fine.

Federal prosecutors sought a 21-year prison sentence for Mr. Hwang, citing the severity of his crimes; however, the judge ultimately sentenced him to 18 years in prison