Archegos Trial Begins: Unpacking the Charges

The trial of former Archegos Capital Management leader Bill Hwang and his right-hand man, Patrick Halligan, kicks off today. They're accused of playing a key role in the dramatic collapse of Archegos in 2021, which caused major losses for banks around the world.

What Happened?

Archegos was an investment firm run by Hwang. In 2021, it all came crashing down in a matter of days. Here's what authorities believe went wrong:

Lying to Banks: Prosecutors say Hwang and Halligan misled banks about Archegos' financial situation to borrow more money. This allowed them to make bigger bets on certain stocks.

Stock Price Manipulation: The borrowed money was allegedly used to buy swaps, a type of financial agreement that increased Archegos' exposure to specific stocks. This, according to the charges, was an attempt to manipulate the prices of those stocks in their favor.

The Downward Spiral: When stock prices started to fall, the banks demanded their money back. But Archegos couldn't pay. The banks then sold off the underlying stocks, causing a rapid decline in their value.

The Fallout:

Billions Lost: Prosecutors estimate that this whole situation wiped out over $100 billion in shareholder value for the companies Archegos was betting on. Additionally, the banks involved lost billions of dollars in loans.

The Charges:

Hwang: He faces several serious charges, including racketeering, securities fraud, wire fraud, and manipulating the stock market in seven different instances.

Halligan: The charges against Halligan are also significant. He's accused of racketeering, wire fraud, and securities fraud.

What Happens Next?

The trial will determine whether Hwang and Halligan are guilty of these charges. The outcome could have a major impact on how financial institutions operate and how closely they scrutinize their clients in the future.