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Sung Kook (Bill) Hwang – the Founder and Head of Archegos – and Three Others Charged with Racketeering and Fraud Offenses Related to Market Manipulation Scheme

WPCNR FBI WIRE. From the Federal Bureau of Investigation. April 28, 2022:

Damian Williams, the United States Attorney for the Southern District of New York, Deputy United States Attorney General Lisa O. Monaco, and Michael J. Driscoll, Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the unsealing of an indictment charging SUNG KOOK (BILL) HWANG, the founder and head of a private investment firm known as Archegos, and PATRICK HALLIGAN, Archegos’s Chief Financial Officer, with racketeering conspiracy, securities fraud, and wire fraud offenses in connection with interrelated schemes to unlawfully manipulate the prices of publicly traded securities in Archegos’s portfolio and to defraud many leading global investment banks and brokerages.

Also unsealed are the guilty pleas of SCOTT BECKER and WILLIAM TOMITA in connection with their participation in the conspiracy. BECKER pled guilty pursuant to an Information before U.S. District Judge Laura Taylor Swain on April 21, 2022. TOMITA pled guilty pursuant to an Information before Judge Swain on April 21, 2022. Both are cooperating with the Government.

U.S. Attorney Damian Williams said:

“We allege that these defendants and their co-conspirators lied to banks to obtain billions of dollars that they then used to inflate the stock price of a number of publicly-traded companies. The lies fed the inflation, and the inflation led to more lies.  Round and round it went. In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio.  But last year, the music stopped. The bubble burst.  The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.”

Deputy Attorney General Lisa O. Monaco said: “Today’s announcement demonstrates the department’s unwavering commitment to hold accountable individuals who distort and defraud our financial markets, including those who occupy the C-Suite. That is especially true for this kind of crime—the kind that leaves a financial crater in its wake.”

FBI Assistant Director-in-Charge Michael J. Driscoll said:

“As alleged, Hwang and his co-conspirators convinced major financial institutions to enter into agreements with them based on lies, the result of which ultimately led to a massive market manipulation scheme. We allege the defendants caused harm to U.S. financial markets and ordinary investors alike, causing significant losses to banks, market participants, and Archegos employees. Today’s charges highlight our commitment to making sure the investment arena remains free from fraudulent activity of all kinds.”

According to the allegations in the Indictment unsealed today in Manhattan federal court:[1]

SUNG KOOK (BILL) HWANG is the founder and owner of Archegos Capital Management and its related business entities, which are collectively known as Archegos. As alleged, HWANG, along with PATRICK HALLIGAN, SCOTT BECKER, and WILLIAM TOMITA lied to banks to obtain billions of dollars that they then used to artificially inflate the stock price of a number of publicly traded companies.

HWANG and his co-conspirators invested in stocks mostly through special contracts with banks and brokers called “swaps.”

As alleged, these swaps allowed HWANG to cause massive buying of certain stocks, including at carefully selected days and times, to artificially pump up stock prices. HWANG, HALLIGAN, and their co-conspirators lied to banks and used a series of manipulative trading techniques to keep those prices high and prevent them from falling.

The lies fed the inflation, and the inflation led to more lies. The scale of this alleged fraud was stunning.  In one year, Hwang turned a $1.5 billion portfolio and fraudulently pumped it up into a $35 billion portfolio.

Last year, the music stopped. The prices dropped and HWANG was unable to keep the prices propped up. When the prices fell, HWANG’s positions were sold off and he could no longer manipulate the prices, and billions of dollars of capital evaporated nearly overnight.

As alleged, the defendants committed this fraud in secret.

Since 2014, HWANG has run Archegos as a private hedge fund or “family office,” meaning that Archegos, unlike other large hedge funds, was not required to tell regulators information about its holdings and debt that might have shined a light on the fraud and allowed the crisis to be averted.  

And because HWANG traded mostly through swaps, he was able to do the massive buying alleged in the Indictment without anyone knowing that Archegos was actually behind all the trading.

Regular market participants, and even the companies themselves, were duped into thinking the price increases were caused by the normal interplay of supply and demand when, instead, as alleged, they were the artificial result of HWANG’s manipulative trading.

To take just one example, as alleged, by March 24, 2021, HWANG effectively controlled more than 50% of the freely trading shares of Viacom – and no one outside of Archegos knew about it—not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps.

Because, as alleged, by using various banks and brokerages for his swaps, HWANG made sure that no single institution would have any idea that he was behind all of this trading.

The Indictment further alleges that in order to get the billions of dollars Archegos needed to sustain this massive market manipulation scheme, HWANG and his co-conspirators lied to and misled some of Wall Street’s leading banks.

They lied about how big Archegos’s investments had become. They lied about how much cash Archegos had on hand. They lied about the nature of the stocks that Archegos held.

And, as alleged, they told those lies for a purpose: so that the banks would have no idea what Archegos was really up to, how risky the portfolio was, and what would happen if the bubble burst one day.

As alleged, that day ultimately came.

Just over a year ago, the market turned and the stock prices HWANG and his co-conspirators had artificially inflated crashed, causing immense damage to U.S. financial markets and ordinary investors.

In a matter of days, the companies at the center of Archegos’s trading scheme lost more than $100 billion in market capitalization, Archegos owed billions of dollars more than it had on hand, and Archegos collapsed.

Market participants who purchased the relevant stocks at artificial prices lost the value they believed their investments held, the banks lost billions of dollars, and Archegos employees, many of whom were required to invest 25% or more of their bonuses with Archegos as deferred compensation, lost millions of dollars.

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WPCNR FOR THE RECORD. Partial Transcript of the of Court of Appeals Decision on Redistricting. April 27, 2022:

EDITOR’S NOTE: In a 78-page decision handed down this afternoon, Chief Justice of the New York State Court of Appeals, Janet DiFiori author of the majority opinion declared both State and Congressional redrawn districts “procedurally unconstitutional” and provided the following “remedy” to show the way ahead to settle the districting problem. The compl;ete decision may be read here paste in your browser to go direct to this historic decision:

https://nycourts.gov/ctapps/Decisions/2022/Apr22/60opn22-Decision.pdf

Here is the transcript from Chief Justice DiFiori’s court decision explaining the court remedy for the correcting of the “procedurally infirm” districts and what comes next:

“The majority correctly concludes that sections 4, 5, and 5-b of article III of the State Constitution, as ratified by the citizens of the State, provide the exclusive process for redistricting (see NY Const, art III, § 4 [e]). This process requires, among other things, that any redistricting plan to be voted on by the legislature must be initiated by the Independent Redistricting Committee (IRC) (see § 4 [b]).

Once this Court holds that the 2022 plans were unconstitutionally enacted and must be stricken on that threshold basis, it should not then step out of its judicial role to further opine on the purely academic issue of whether the 2022 congressional map failed to comply with the substantive requirements of section 4 (c) (5).

The 2022 plans, which the majority concludes are void ab initio, are no longer substantively at issue, nor can the majority seriously claim them to be so.

Furthermore, although the majority purports to provide “necessary guidance to inform the development of a new congressional map on remittal” (majority op at 24 n 12), the majority’s opinion provides no such guidance.

Its conclusion, based on affirmed findings of fact that the congressional map was drawn with partisan intent, is not illuminating in the least because the majority does not engage in the kind of careful district-specific analysis that might provide any practical guidance to an actual mapmaker, nor could it on this record (cf. Wilson dissenting op at 12-25).

By opining on this academic issue, the majority renders “an inappropriate advisory opinion” by “prospectively declar[ing] the [redistricting] invalid on additional . . . constitutional grounds” (T.D. v New York State Off. of Mental Health, 91 NY2d 860, 862 [1997]; see Self-Insurer’s Assn. v State Indus. Commn., 224 NY – 3 – No. 60 – 3 – 13, 16 [1918] [Cardozo, J.]

[“The function of the courts is to determine controversies between litigants . . . They do not give advisory opinions. The giving of such opinions is not the exercise of the judicial function”]).

Given the procedural violation flowing from the breakdown in the constitutional process, we must fashion a remedy that matches the error.

1 The Constitution contemplates that a court may be “required to order the adoption of . . . a redistricting plan as a remedy for a violation of law” (NY Const, art III, § 4 [e]). In so ordering, where a court finds that redistricting legislation violates article III, “the legislature shall have a full and reasonable opportunity to correct the law’s legal infirmities” (§ 5).

Consistent with these provisions, this Court should order the legislature to adopt either of the two plans that the IRC has already approved pursuant to section 5-b (g). Those plans show significant areas of bipartisan consensus among the IRC commissioners. The boundaries of the districts of Upstate New York, in particular, are nearly identical between the two plans and similar to those in the procedurally infirm plan enacted by the legislature (see Matter of Harkenrider v Hochul, — AD3d —, 2022 NY Slip Op 02648, *7 [4th Dept April 21, 2022] [Whalen, P.J. & Winslow, J., dissenting in part]).

Given the existence of these IRC-approved plans, there is no need for a redistricting plan to be crafted out of whole cloth and adopted by a court.

Rather, the legislature should be ordered to adopt one of the IRC-approved plans on a strict timetable, with limited opportunity to make amendments thereto.

As part of our judicially crafted remedy, we could order that any amendments to either plan “shall not 1 The majority seems unwilling to grasp this concept (majority op at 31-32 n 20). – 4 – No. 60 – 4 – affect more than [2%] of the population of any district contained in such plan” (Legislative Law former § 94).

In other words, the legislature would be bound by its own self-imposed restrictions, which were in effect at the time these plans were first presented for legislative approval. Such a remedy not only adheres more closely to the constitutional redistricting process, but it discourages political gamesmanship.

Throughout this proceeding, respondents have asserted that the legislature has near-plenary authority to adopt a redistricting plan, whereas petitioners have sought to take the process out of the hands of the legislature and to place it into the hands of the judiciary.

It is of course disputed why the constitutional process broke down, but it is readily apparent that the IRC’s bipartisan commissioners failed to fulfill their constitutional duty. None of the parties is entitled to the resolution that he or she seeks.

In addition, this remedy allows the legislature to enact a plan that minimizes the impact on the reliance interests of both the voters and candidates. Petitions have been circulated, citizens have contributed monetary donations to the candidates of their choice, and eligible voters have had the opportunity to educate themselves on the candidates who are campaigning for their votes, all in reliance on the procedurally infirm redistricting plan enacted by the legislature.

Of course, entrenched candidates have the party apparatus to support them in the event that further redistricting causes excessive upset to the current plan. In such a circumstance, outside candidates, upstart candidates, and independent candidates, who lack the resources of the well-heeled, will be disadvantaged most, leaving – 5 – No. 60 – 5 – the voters who support them without suitable options.

The legislature, duly elected by the citizens of this State, is in the best position to take these considerations into account. Yet, the remedy ordered by the majority takes the ultimate decision-making authority out of the hands of the legislature and entrusts it to a single trial court judge.

Moreover, it may ultimately subject the citizens of this State, for the next 10 years, to an electoral map created by an unelected individual, with no apparent ties to this State, whom our citizens never envisioned having such a profound effect on their democracy.

That is simply not what the people voted for when they enacted the constitutional provision at issue.

Although the IRC process is not perfect, it is preferable to a process that removes the people’s representatives entirely from the process.

The majority states that it “decline[s] to render the constitutional IRC process inconsequential in the manner requested by the State respondents” (majority op at 23); however, the majority does just that by crafting a remedy that cuts the legislature out of the process. The citizens of the State are entitled to a resolution that adheres as closely to the constitutional process as possible.

By ordering the legislature to enact redistricting legislation duly initiated by the IRC, this Court could afford the legislature its “full and reasonable” opportunity while honoring the constitutional process ratified by the people.

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BULLETIN: WPCNR WHITE PLAINS LAW JOURNAL. From the New York State Court of Appeals. April 27, 2022:

The June Democratic and Republican Primaries in state races and congressional races as well as the general elections in November will not be subject to the newly redrawn districts conceived by the New York State Legislature.

Today after a morning hearing before the Court of Appeals in Albany, the Court ruled the newly minted districts on both state and congressional levels were “procedurally unconstitutional.”

The decision went further than the Appellate Division, Fourth Department “split decision” in Rochester last week which had made a split decision, ruling the state redrawn districts for State Senate and Assembly could proceed, but the congressional districts would have to be withdrawn.

According to the Associated Press the decision is not subject to appeal.

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SINCE SEPTEMBER, WHITE PLAINS SHOWS 25% TOTAL INFECTIONS 1,950 STUDENTS, TEACHERS AND STAFF HAVE TESTED POSITIVE OF 7,917 STUDENTS, TEACHERS, STAFF IN THE DISTRICT THRU APRIL 24

IN WESTCHESTER COUNTY SCHOOL DISTRICTS– IN FIRST WEEK BACK TO SCHOOL. 1,002 STUDENTS, 228 TEACHERS — 195 STUDENTS TEST POSITIVE, 108 STAFF TEST IN FIRST WEEK. 

WESTCHESTER THROUGH 8 MONTHS OF SCHOOL  WITH 2 MONTHS LEFT IN YEAR REPORTS 25,738  WESTCHESTER STUDENTS TESTED POSITIVE OF APPROXIMATE 149,318 SCHOOL STUDENTS IN COUNTY POST SPRING BREAK INFECTIONS INCREASE POSITIVES IN 6 OTHER MID-HUDSON REGION COUNTIES, NASSAU, SUFFOLK, NYC.

WESTCHESTER STUDENTS SHOW MORE COVID INFECTIONS THAN NASSAU AND SUFFOLK COUNTIES YET NASSAU AND SUFFOLK HAVE 700,000 MORE IN POPULATION

WPCNR COVID DAILY. From the NYS COUNTY COVID SCHOOL REPORT & NYS COVID TRACKER. Analysis & Observation by John F. Bailey. April 26, 2022 UPDATED WITH MONDAY STATISTICS CHARTS 1:30 EDT:

Westchester County Covid infections in the public schools increased last week after public school children returned to schools Monday, June 18, with the option of not having to wear masks, established by Governor Hochul.

In the White Plains City School District in April 11 through 24^th periods the state laboratory reporting estimates 22 tested positive of  417, 5% positive, the same positive rate of Westchester County. In the last 7 Days (April 18-24) , 8 of 254 students tested positive or 3%.  At 254 tests in a full school week, this is about 4% of the entire student body across all 9 schools.

Dr. Joseph Ricca, White Plains Superintendent of Schools told WPCNR Monday afternoon 40 students (10 more than the lab has reported so far) had tested positive. He said testing continued to be done to random students as they entered school buildings, and parents who wish to test their own children at home can request the rapid test kits (2 to a package) from their schools.

Dr. Ricca said any student testing positive goes through contact tracing to advise other parents if their child or children had been exposed. Dr. Ricca promised a full briefing to the school district was being prepared.

Infections so far for the last nine months in the school district  are much more frequent in the White Plains Middle School (202 since September) and White Plains High School, 291.

Around Westchester County new positives are increasing in the schools., 1,601 through Monday

In the last  two weeks, April 11 to 24 (the vacation week for public schools and the first week of return to school) 1,002 Students tested positive across Westchester County, 228 teachers and 108 Staff tested positive. Monday, in the latest covid school report, that has increased by 205 more students to 1,207; TEACHERS infected are at 261 and Staff, 133.

Students testing positive reported during the week of actual vacation, could conceivably be viewed as having been infected at schools the week before they left for the spring break vacation week, or infected during the week of socializing or vacations.

However the return to schools beginning one week ago, appears to have shown that perhaps there might have been more tests administered in Westchester, or self-testing each day for all students.

In the 5 days of school throughout Westchester County last week, the first session back from vacation, 875 students tested positive 87% of the 1,002 the last two weeks through Friday the 24^th— 126 of them tested positive on Friday the 24^th alone.

Can we assume that the average of 125 new positives a day will continue adding student infections at the rate of a thousand a week the next two weeks? That is how last week Countywide figures project. School officials may want to work out more testing at the entrance of schools to prevent a chaotic May.

It is not just student infections that should concern Superintendents with figures like these, but the teacher infections are devastating to the ability to deliver instruction to classes where students may be out for quarantine. Dr. Ricca of White Plains said at the present time White Plains was not experiencing a teacher or staff shortage due to the pace of infections. What is happening in the schools has to be looked at promptly by the State Health Department and Superintendents experiencing the level of infections sharply rising, which should go without having to write this.

Another factor is how many teachers can any district lose to covid quarantines and relaxed masking and testing? The more relaxed the atmosphere, the more the spread.

Student infections in last two weeks in the Mid-Hudson Region

Westchester: 875

Orange 168

Rockland 146

Dutchess 149

Ulster 149

Putnam 26

Sullivan 23

TOTAL S: 1,536

In two weeks time those 1,536 if they infect 2 other persons will give covid to 3,000 or another 1,500 students if they have only seen one other person. The possibility of more positives going undetected early in school student populations has potential to increase exponentially the spread of covid going into May June.

This is why, though Westchester infections slowed this week, with 210 being tested positive Sunday, the county has had four consecutive weeks of increased infections. The 2, 156 new positives across all age levels in Westchester alone, was an 85% increase in infections in 3 weeks from 1,095 March 27 to April third to 2, 156. We cannot tolerate 3,000 students positive in two weeks and keep the covid from spreading exponentially.

The Westchester number of students testing positive the last two weeks is instructive compared to Nassau and Suffolk Counties, because Nassau has a population of 1,395,774 persons, Suffolk has 1.5 Million.

Westchester reported 875 student infections. Nassau County reported 653 and Suffolk County, 485 significantly less in both Long Island Counties than Westchester, but as the Monday numbers in the graphic show, Westchester has now topped both counties combined with a much faster growth of school student infections.

Editor’s Note: The WPCNR COVID DAILY is the day-by-day record of track of the new covid pace of infections in Westchester County NY USA. It was started April 4 when a fifth wave of Covid infections started and has continued for 4 straight weeks of infections and it is now entering a critical month averaging over 2,000 new infections a week.

In each Daily, WPCNR adds in the Westchester County Positive Tests reported the previous day for convenient reference to how good Mr. and Mrs. and Ms. Westchester are controlling the spread of the disease. The statistics are based on the daily reports published between 2 and 4 P.M. on the New York State Covid Tracker, the Westchester Covid-19 Dashboard that tracks towns and cities in Westchester and the New York State Covid School Report.

The analysis is created and written by John F. Bailey, based on the actual statistics, whose opinions are solely his own and observations are meant to inform and demystify to the concerned person, what the statistics actually are saying and how they might want to consider how to live carefully with the covid situation. The math is solely based on Society of American Baseball Research protocols.

To access the New York State and Westchester websites where the statistics come from in preparing the Covid Daily, here are the links:

COUNTY COVID  SCHOOL DATA BY COUNTY

 https://schoolcovidreportcard.health.ny.gov/#/countysummary  

SCHOOL COVID DATA BY REGION (LIKE MID-HUDSON REGION)

 https://schoolcovidreportcard.health.ny.gov/#/summary  

Individual covid individual school district results 

  https://schoolcovidreportcard.health.ny.gov/#/home

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WPCNR COUNTY CLARION-LEDGER. By John F. Bailey. April 25, 2022:

County Executive George Latimer announced Westchester County would follow up on the New York State Legislature passage of a bill authorizing towns villages, counties to cut the gasoline tax.

Towns and villages can enact it by sending legislation to the County Board of Legislators that would lower the cost of gasoline in Westchester County 20 cents a gallon.

That would bring the cost of a gallon of regular cash purchase of gasoline to about $4.39 a gallon.

He said he hoped to have this happen within two weeks. The cut in gas price sales tax will not happen in White Plains unless White Plains city government requests it through Common Council action, Mr. Latimer said Yonkers, New Rochelle, and Mt. Vernon also had to request permission through legislation to establish the tax.

WPCNR is checking with White Plains City Hall to see if that is in the works for next Monday Common Council meeting, May 2.

The cut in gasoline sales tax will be made up by the surpluses the county has enjoyed because of covid relief funds and increased sales tax receipts through 2021.

In another move, the County Executive announced bus riders could ride free on Beeline Buses all summer long. Mr. Latimer said he hoped this would induce more persons to switch to bus transit.

In another new development, Mr. Latimer announced Breeze Airlines would be flying coast to coast various vacation and business destinations nationally from Westchester County Airport with no increase in number of flights using Airbus aircraft, no jumbo jets. He said the airline would be flying out of arrival and departure “slots” currently not assigned during the airport hours of operation 6AM to 11 P.M.

On the subject of Covid, County Executive Latimer said Covid cases were rising, that hospitalizations were up as of today to 65, and the disease, though increasing, seemed to be “stabilizing.” He said masks were still required on County Beeline Buses but were optional at Westchester County Airport. He urged persons to get vaccinated.

At the close of the regular Monday news conference, a new phone app was presented by Sustainable Westchester that alerts persons with the App on their cellphone to turn off appliances, lower temperature on “Peak Days” in the summer and of course, all year around. The “PEAK” alerts, the presenter said saved her $120 on her apartment this past year.