US Court Upholds 18-Year Prison Sentence for Bill Hwang, Main Culprit in 'Margin Call Crisis'

A U.S. court has upheld the previously imposed 18-year prison sentence for Bill Hwang (Korean name Hwang Sung-kuk), a Korean-American and founder of Arkeogos Capital Management, who caused massive losses on Wall Street in March 2021 due to a derivative financial product margin call crisis.

According to Bloomberg on the 19th (local time), Alvin Hellerstein, a judge at the U.S. District Court for the Southern District of New York, rejected Hwang's request to convert the latter 6 years and 6 months of his 18-year sentence to house arrest due to health reasons.

Judge Hellerstein stated the reason for denial, saying, "(Hwang) must be treated the same as other defendants with health issues. Many of them have health problems."

Previously, on the 20th of last month, Judge Hellerstein sentenced Hwang to 18 years in prison on 10 charges including fraud, and the next day expressed willingness to reconsider the sentence. Accordingly, the 62-year-old Hwang sought a sentence modification citing health concerns. However, Judge Hellerstein did not detain Hwang in court and allowed him to remain out of custody while appealing.

The U.S. Attorney's Office for the Southern District of New York indicted Hwang in April 2022, accusing him of market manipulation that caused the collapse of a company worth $36 billion (approximately 50.4 trillion KRW) and inflicted losses exceeding $10 billion (approximately 14 trillion KRW) on lenders. In July, Hwang was found guilty on 10 counts including fraud and extortion, and prosecutors sought a 21-year prison sentence for him that same month.

In 2020, Hwang invested approximately $50 billion (about 70 trillion KRW) in stocks through total return swaps (TRS) and contracts for difference (CFD) with investment banks.

Hwang's borrowings surged to $160 billion (about 224 trillion KRW) at the time, but as the stock prices of his investments fell, margin calls requiring additional collateral occurred. When investment bank Goldman Sachs sold the collateral stocks through block trades, losses spread and ultimately the company went bankrupt. The losses incurred by the investment banks amounted to approximately $10 billion (about 13.6 trillion KRW).