Bill Hwang: Loan Fraud, Market Manipulation

Bill Hwang used to claim he invested “according to the word of God.” Now prosecutors are saying that he’s about to become the biggest indictment since Bernie Madoff. 

Hwang was the owner of an investment firm known as Archegos. According to the US government, his company engaged in market manipulation, buying up large portions of stocks in companies to inflate the price, then lied about its market exposure to banks to get more funding. For some time, Hwang’s activities were invisible to regulators because he was running a family office and was using a financial instrument known as a swap. 

The scheme resulted in $10 billion of losses directly to banks financing Archegos, and destroyed nearly $100 billion in stock value for the companies they chose to invest in. Anyone who chose to invest in the stocks lost money, as did Archegos employees. 

Let’s take a closer look at the crimes Hwang is guilty of.

Market Manipulation

Market manipulation is covered by 15 U.S. Code Section 78i. It is also referred to as a “pump and dump” scheme. 

A pump and dump scheme involves artificially inflating the price of a security so that you can sell it for personal gain. A perpetrator of a pump and dump scheme generates a ton of hype over a stock so they can sell their stock at a higher stock price.

Once they sell all their stock for a tidy profit, the price of the stock falls, and everyone else who bought the stock loses a great deal of money. 

Be very careful if you are involved in any text, email, or other marketing that suggests your followers should invest in specific stocks, particularly if those are stocks you’re buying. This kind of behavior is common in pump and dump schemes, and could bring your own activities under scrutiny. 

Loan Fraud  

A person commits loan fraud any time they lie to a financial provider for the purposes of obtaining loan funds. In this case, Hwang lied about the how big his investments had become, how much cash his company had on hand, and the nature of the stocks that he held. 

This ensured the banks did not know how risky the portfolio was, or what was likely to happen the moment the market made its downturn. 

Other Crimes

Hwang was also convicted of racketeering, securities fraud, and wire fraud.

He now faces up to 380 years in prison for all counts. 

His top lieutenant, Patrick Halligan, was also arrested on similar charges. 

Investment is Complicated

The entire culture of Wall Street tends to promote the kind of behavior that can get you in trouble with the law. If you run a small firm like Hwang’s and have reason to believe your own activities might have drawn the eye of the federal government, don’t delay.

Reach out to our office to get help with your criminal case today. 

See also:

Are You Guilty of Insider Trading?

4 Mistakes to Avoid if You’re Under Investigation for White Collar Crime

Are You Guilty of Loan Fraud?

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