Korean-American Investor Bill Hwang Sentenced to 18 Years in US Court Over 'Margin Call' Crisis

In March 2021, a U.S. court sentenced Bill Hwang (Korean name Hwang Sung-guk), a Korean-American investor and founder of Archegos Capital Management, to 18 years in prison on charges related to the massive losses caused on Wall Street by the derivative margin call (additional collateral demand) crisis.

According to the New York Times (NYT) and others on the 20th (local time), Alvin Hellerstein, a judge of the U.S. District Court for the Southern District of New York, made this decision at the sentencing hearing of Hwang's fraud case held that day.

Bill Hwang, founder of Archegos Capital. Photo by AFP Yonhap News

Hwang was found guilty on 10 charges including fraud and extortion last July. At that time, the prosecution sought a 21-year prison sentence.

On the day of sentencing, Hwang apologized, saying, "I feel deep pain for the Archegos employees, the banks, and the bank employees who suffered."

Prosecutor Andrew Thomas requested a heavy sentence, stating, "This case is a rare incident that can truly be called a national disaster."

Earlier, in April 2022, the U.S. Attorney's Office for the Southern District of New York indicted Hwang, accusing him of market manipulation that caused the collapse of a company worth $36 billion (about 50.4 trillion KRW) and inflicted losses exceeding $10 billion (about 14 trillion KRW) on lenders.

Hwang and Archegos invested approximately $50 billion (about 70 trillion KRW) in stocks through total return swaps (TRS) and contracts for difference (CFD) agreements with investment banks (IBs) in 2020, leveraging more than five times their assets under management.

Hwang's borrowings surged to $160 billion (about 224 trillion KRW). However, when the stock prices of the invested assets fell, a margin call crisis occurred, ultimately leading to the company's bankruptcy. As a result, investment banks such as Morgan Stanley, UBS, and Nomura suffered losses amounting to $10 billion. Swiss investment bank Credit Suisse (CS) was acquired by its competitor UBS following losses of $5 billion.

Hwang was a prot?g? of Julian Robertson, the billionaire hedge fund manager who led Tiger Management. In 2001, he launched Tiger Asia Management and grew it into one of Wall Street's largest Asia-focused hedge funds. However, in 2012, he was investigated for insider trading related to Hong Kong investments and settled the case by paying $44 million. Subsequently, in 2013, he founded his personal investment firm, Archegos.