He Lost $36 Billion In a Week. Now Bill Hwang Is Fighting To Avoid Prison

(Bloomberg Businessweek) -- It came to him in a dream. That’s what Bill Hwang told people..In his vision, the blood of Christ washes over New York, cleansing the great metropolis of its sins. The mysterious trader — creator-destroyer of one of the world’s great fortunes — was so moved by the idea that, like a modern Medici, he commissioned a famous artist to bring his dream to life..Today the striking artwork hangs in the Midtown offices of the Christian charity Hwang established while building Archegos, his family office, into a treacherous force that rattled markets. Thick rivulets of red paint, symbolizing the blood, ooze down the spire of the Empire State Building and the surrounding grayscale skyline..It was in these offices just before Easter, with the first spring blossoms in Central Park framed through the 22nd-floor window, three dozen people squeezed around a conference table in front of Hwang for a talk on scripture. Looking as impeccable as ever—thick, stylish glasses, green quarter-zip sweater, graying hair swept roguishly back—he stood before a large screen..“Money Failed!” the slide flashed..Those words from the Bible, in Genesis 47, don’t even begin to capture the wild arc the enigmatic financier has traced, or what is about to happen next..In near total secrecy, Hwang amassed a fortune that briefly eclipsed $36 billion, only to see it wiped out very publicly. In the end, the Archegos flameout inflicted billions of dollars in losses at banks that did business with him—even hastening the death of Credit Suisse..On May 8, the man born Sung Kook Hwang is due to appear at the federal courthouse in Lower Manhattan in what promises to be one of the most closely watched Wall Street trials in recent memory..The Justice Department has accused the son of a Korean pastor of lying to some of the world’s most powerful banks as they plied him with financing to make wagers that sent stocks soaring and crashing. Raising the stakes, federal prosecutors are even invoking racketeering laws famously used to take down mob bosses. These could put Hwang away for 20 years. He has pleaded not guilty..“This is one of the biggest market-manipulation cases ever charged,” says Josh Naftalis, a former federal prosecutor. “The big question now is will this guy go to jail for it?”.It’s all the more riveting because Hwang is a former acolyte of hedge fund legend Julian Robertson, making him a so-called Tiger Cub. “They are regarded as the most sophisticated traders out there,” Naftalis says. “That’s why people care.”.Embarrassed C-Suite.It’s not the first time Hwang, 60, has tangled with the law. His Tiger Asia Management hedge fund, the precursor to Archegos, pleaded guilty to wire fraud in 2012, while Hwang himself settled US civil claims that he engaged in insider trading. He didn’t admit wrongdoing..On Wall Street’s trading floors and soft-carpeted C-suites, the Archegos fiasco left executives red-faced as their banks tallied more than $10 billion in losses. Despite the investor’s earlier run-in, they had treated him as a prized client—with a thirst for risk that generated lucrative fees. Archegos’ wipeout, in March 2021, took away all but a sliver of Hwang’s peak fortune, which has shrunk to less than $100 million, according to people with knowledge of his finances..“I’m a great fan of Bill, and it could probably happen to anyone. But I’m sorry it happened to Bill,” Robertson said shortly after Archegos blew up. Robertson, who died in August 2022, tagged Tiger Global’s Chase Coleman and Hwang as two young investors destined for success in a 2007 interview..Hwang had long seen his role as a Christian capitalist, someone who seeks to make money for use spreading the faith. .Since Archegos collapsed, his Grace and Mercy Foundation has become a refuge for former employees—and a lucrative one for some of them. Tax records show several Archegos staffers collected more than $500,000 for their work overseeing the charity in 2022, which had $528 million by the end of that year. Such compensation isn't unheard of in philanthropy, but it’s more common atop institutions a magnitude larger or more prominent..Prosecutors have sought to prevent Hwang from mentioning any “prior good deeds,” including charity and philanthropy..There might be those who think Hwang is using his religion as a shield, says Andrew Field, a pastor at Redeemer Presbyterian, who has seen Hwang at New York events. “The knee-jerk reaction is he's being manipulative. There are plenty of people who’ve used that tactic,” Field says. “For him it’s bone deep, it’s 100% legit.”.A big question on Wall Street minds: How did Hwang ever think he could safely exit the outsize investments he had amassed in ViacomCBS and several Chinese companies? His strategy, in retrospect, seems like market suicide. Archegos borrowed heavily from banks in Asia, Europe and the US as he bid up stocks to stratospheric heights. But selling would have brought their prices back down. When some slipped, lenders began issuing margin calls, toppling the house of cards..Prosecutors say Archegos wasn’t honest with banks about the extent of its borrowing and the concentration of its wagers. Credit Suisse lost $5.5 billion, which—along with other missteps—eventually culminated in the firm’s emergency takeover by UBS Group AG. Nomura Holdings Inc. lost almost $3 billion, and Morgan Stanley more than $900 million..Judge Alvin Hellerstein, who oversaw lawsuits arising from the Sept. 11 terrorist attacks, will preside in the courtroom across from the building where the hush-money trial of former President Donald Trump is playing out. Hellerstein, 90, is the same judge who rebuffed Trump’s bid to have his trial moved out of that venue..Loyal friends insist Hwang did nothing wrong. They say he simply made bad investment decisions. In the end, these people say, money failed him; God didn’t..That idea was the subject of Hwang’s talk at the foundation in mid-March, photos of which were shared by a Grace and Mercy employee online. The discussion centered on the Old Testament account of Joseph, whose prophetic dreams and wisdom during a time of famine are often read as a story of God’s power of redemption. “Bill shared how money had failed him, but the word of God doesn’t fail,” says Emerson Collins, who flew in from a Christian ministry in Colorado to be there..‘Fallback Plan’.The foundation has become even more central to Hwang as he awaits trial. He’s often seen at book club meetings and Bible readings there, according to fellow participants. A signature effort is called Public Reading of Scripture, which, as the name suggests, emphasizes reading the Bible aloud. The project extends to prisons..Such initiatives, however, are only one aspect of the foundation. Grace and Mercy has also become the employer of some people who used to work at Archegos. As of 2022, the foundation counted nine Archegos veterans among its officers and highest-paid employees, according to its most recent tax filings..Those people include the family office’s former chief financial officer, Patrick Halligan, a co-defendant in the Justice Department’s case, who was paid $539,000 plus benefits in 2022 in his role as the philanthropy’s treasurer. He has pleaded not guilty..Diana Pae, the former co-president of Archegos who previously was a managing director at Goldman Sachs Group Inc., was the highest-paid employee, with a salary of about $1 million. Four other former employees were paid $500,000 to $800,000 for jobs as investment officers. Before the blowup, the nonprofit’s tax filings showed that senior Archegos employees, such as Halligan and Andrew Mills, had donated their time..Bill Hwang Fights Jail After Losing $36 Billion" />Many of the Archegos employees used to trade for the investment firm and the nonprofit as part of their old job, and now only one of those entities is left, one of the people said. The foundation doesn't outsource its trading activities, the person noted, and its assets grew significantly in 2023, capitalizing on ebullient markets.Hwang pays these employees on a scale similar to much larger foundations. The $16.4 billion Ford Foundation, for instance, paid its president $1.2 million in 2022. Its chief operating officer and treasurer made $630,000.Brendan Sullivan, a former Archegos employee who sued Hwang to claim up to $50 million in compensation, alleges in his suit that at Archegos retreats in 2018 and 2019, Hwang told staff that Grace and Mercy was his “fallback plan” if anything ever happened to his investment firm. During a company call on March 29, 2021—detailed in Sullivan’s suit—Pae told employees that 15 to 30 Archegos employees could transfer to the foundation.“Hwang and Pae misrepresented these opportunities as a way of trying to triage the legal risk they knew they faced—civilly and criminally—by co-opting employees who might make claims against them or go to the authorities,” Sullivan alleges. Hwang’s lawyer said in a court filing that Sullivan failed to establish that Hwang misrepresented anything, “let alone where, when and to whom.”Nike, GucciBy all appearances, Hwang himself continues to eschew the trappings of extravagant wealth. Since Archegos collapsed, he has lived in the same place he did when he was flying high: a modest corner of suburban New Jersey, plus a rented apartment in Manhattan for the trial.Visitors arriving at the Grace and Mercy Foundation pass the artwork of Hwang’s vision, stretching nearly from floor to ceiling and covering a large section of the wall. James Lillis, a senior pastor at a Connecticut church, shared a photo of the piece and the inspiration behind it with his online followers after visiting Hwang at the foundation in March.The artwork, commissioned in 2016, is rendered in metal mesh by renowned South Korean artist Seungmo Park. Park also created a larger-than-life depiction of Olympic runner Sebastian Coe for Nike’s headquarters in Oregon and the façade of Gucci’s flagship store in Seoul. One of his works graced the upscale home at the heart of the 2019 Oscar-winning South Korean film .At the March gathering where the story of Joseph came up, neither Hwang nor his visitors discussed the looming criminal case, says Collins, the Colorado attendee. Hwang spent time with his visitors throughout the event, and they even went to a synagogue to hear the Torah read aloud, to observe and emulate the public reading of scripture.“We still continue to pray for him,” Collins says.--With assistance from Bob Van Voris.(Adds detail about artwork in the third-last paragraph.)More stories like this are available on bloomberg.com©2024 Bloomberg L.P.

He Lost $36 Billion In a Week. Now Bill Hwang Is Fighting To Avoid Prison

The Archegos founder who erased his fortune in a blink — and helped bring down Credit Suisse — heads to trial next week with his faith unshaken.

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