"50 Trillion Won Company Bankruptcy"… Korean-American Investor Bill Hwang Faces 21-Year Prison Sentence for Margin Call Crisis

March 2021 Margin Call Crisis
Investment Banks' Losses Reach $10 Billion
Prosecutors Allege "Deception of Banks and Stock Price Manipulation"

Bill Hwang, a Korean-American investor indicted in the derivative financial product margin call crisis that occurred on Wall Street in the United States in March 2021, has been sentenced to 21 years in prison.

Bill Hwang, founder of Archegos, appearing at a Manhattan court (left). Photo by Yonhap News

According to major foreign media, on the 15th (local time) at a trial held at the Manhattan court in New York, the prosecution demanded a 21-year prison sentence for Hwang. The prosecution claimed that Hwang, founder of Archegos Capital Management, caused the collapse of a company worth $36 billion (about 50 trillion won) through market manipulation and inflicted losses exceeding $10 billion (about 14 trillion won) on lending institutions.

Hwang and Archegos invested approximately $50 billion (about 70 trillion won) in stocks through total return swap (TRS) and contract for difference (CFD) agreements with investment banks (IBs) in 2020. This amount was more than five times the assets held by Hwang and Archegos. Subsequently, Hwang’s borrowings increased to $160 billion (about 223 trillion won), but as the stock prices of the invested items fell, a margin call situation requiring additional collateral arose, eventually leading to the company’s bankruptcy. The losses incurred by the investment banks were estimated to be around $10 billion. Credit Suisse (CS), a Swiss investment bank that had dealings with Archegos, was acquired by its competitor UBS due to the fallout from these losses.

The prosecution believes that Hwang manipulated stock prices by deceiving banks using Archegos’ portfolio, borrowing large sums, and investing them in derivatives of stocks they owned.

However, Hwang’s side denies the prosecution’s claim, arguing that there is no evidence proving that he caused losses to banks through lies. In July, Hwang was found guilty on 10 charges including fraud and extortion. The sentencing hearing is scheduled for the 20th.