WASHINGTON, D.C.— Stephen Hall, Legal Director and Securities Specialist, issued the following statement in connection with the sentencing of Bill Hwang, head of the former Archegos investment fund.
“Bill Hwang’s massive market manipulation caused huge losses among investors, his own employees, and banks. Eighteen years is a meaningful sentence that reflects the seriousness of these crimes and will go a long way toward punishing and deterring this horrendous type of white collar crime. The government’s recommendation of 21 years in prison would have been even more effective and appropriate, but we believe justice has been largely served. And we credit the judge for acknowledging, as we have argued, that the system must treat white-collar criminals no less severely than those engaged in narcotics or street crime.
“Hwang’s crimes shook the financial markets and highlighted major regulatory vulnerabilities in our financial system. Hwang’s scheme had multiple layers that prosecutors described as a ‘pump and brag scheme,’ including multiple acts of fraud. Hwang lied to major Wall Street banks about the composition, concentration, and liquidity of Archegos’s portfolio to secure and retain billions of dollars in financing, while the banks were all too eager to look the other way while they profited off Hwang. Hwang used stock purchases along with risky and secretive derivatives to acquire, and at the same time hide, huge positions designed to pump up the stock prices of a handful of public companies, particularly in the tech and media sectors. The bubble burst when those stock prices started to fall and Archegos could not keep pace with the margin calls from the banks.
“Notwithstanding the outcome today, there are still unanswered questions and a lack of accountability for the Wall Street banks that actually facilitated the fraud and agreed to deal with Hwang for their own gain. Perhaps the banks were unwitting facilitators, but the record raises questions even on that issue, indicating that there were compliance lapses. Is there more to learn about the banks’ participation? Did some of them know or have reason to know that Hwang was engaged in a manipulation scheme yet chose to turn a blind eye and continue their involvement given the potential profits at stake? The record is not complete on these important questions. Prosecutors and regulators must do more to hold large financial institutions accountable, not just the scam artists.”
“Finally, while the issue of restitution appears to be unresolved, the government’s proposed restitution plan raises questions about basic fairness. It would obligate Hwang to make restitution to the banks but not to the countless everyday investors who suffered losses from Hwang’s misconduct—misconduct that the banks facilitated, whether intentionally or not. And as between the banks and those investors, who is better able to absorb the losses? The banks, surely. We hope the court considers these issues as he proceeds.”
Find our full memo on the sentencing here.
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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
