Bill Hwang, the gift that keeps on giving

The 20th of November marks the long overdue conclusion to the story of the rapid rise, and even faster fall, of Bill Hwang and Archegos Capital Management. U.S. District Judge Alvin Hellerstein handed down the financier’s 18 year sentence, turning him into a public example and a cautionary tale in how a failure in regulation over financial entities poses huge systemic risk. 

Hwang’s career as a former protege of the legendary fund manager Julian Robertson at Tiger Management had allowed him to flourish within the world of finance, later establishing him as one of Robertson's most promising disciples. It was this strong performance that Hwang had demonstrated working under Robertson that had led to Robertson seeding Hwang’s first fund “Tiger Asia” in 2001. However, Hwang’s glory would come to halt in the early 2010s, when he experienced his first run in with the law. 

In spite of his success as a fund manager in the following years, Bill Hwang pleaded guilty to wire fraud, in relation to his firm’s involvement in illegal trading of Chinese bank stocks in 2012–this would result in Hwang paying a $44million settlement to the US authorities, Tiger Asia being shut down and Hwang being barred from trading in Hong Kong. 

Following this fall from grace, Bill went on to set up his newest venture, a family office named Archegos Capital Management, in 2013, where he had managed to find fairly strong returns in his next few years. 

Family offices have always been posed as an issue to regulatory bodies within the financial markets due to the fact that they are exempt from the Investment Advisers Act of 1940, an act of the U.S. Congress that mandates investment funds with 15 or more clients to register with the SEC and allow them to assess a fund’s portfolio as a means of assessing systematic risk within the financial sector. 

With Archegos being free from disclosing the size of their positions within their portfolio, Hwang was accused of lying to banks about the positions he held in order to borrow and make highly leveraged bets on Media and Technology equities, which would be the first lead to the eventual demise of Archagos.

In 2021 Archegos Capital covertly amassed $160 billion USD in stock exposure using risky financial tools called total return swaps (TRS). A TRS is like renting a stock: you pay a fee to profit from its rise but are liable for its losses if it falls.

Hwang’s downfall began when stock prices such as that of ViacomCBS fell, triggering margin calls that he could not meet. U.S. federal prosecutors charged Hwang with fraud and market manipulation, alleging that he falsified the size, diversity, and risk of Archegos’ portfolio for the purpose of securing  billions of dollars in loans. This deception enabled him to place risky, concentrated bets that unnaturally inflated stock prices.

When the truth was revealed, the resulting sell-off wiped out around $100 billion in market value. Credit Suisse, slower to respond as compared to peers like Goldman Sachs, lost $5.5 billion, a key factor in its eventual collapse and merger into UBS.

Hwang’s actions represent unchecked greed and dishonesty in modern finance. Like a gambler recklessly betting beyond his means, he misled banks and destabilized markets. His fraud did not just ruin his empire—it exposed systemic flaws in risk management, as evidenced by Credit Suisse’s hesitation.

A comparison to FTX’s Sam Bankman-Fried is appropriate: both represent a culture of financial deception driven by greed. However, Hwang’s manipulation took place within traditional banking institutions, while Bankman-Fried took advantage of cryptocurrency's regulatory gaps. Together, they highlight the need for stricter measures of accountability, and perhaps stronger regulation, across financial sectors to prevent such failures.

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