(Bloomberg) -- Bill Hwang should get no prison time for his role in the 2021 collapse of Archegos Capital Management, his lawyers said in a court filing.
Hwang, 60, will be sentenced Nov. 20 for fraud, market manipulation and racketeering conspiracy. He was convicted in July following a two-month trial that captivated Wall Street. He faces a maximum of 20 years in prison on each count.
A jury found that Hwang orchestrated a scheme to mislead banks into providing Archegos, his family office, with trading capacity that swelled its highly concentrated portfolio to $36 billion in value before it imploded in March 2021. Its counterparties lost some $10 billion, and the debacle was a major factor in Credit Suisse Group AG’s subsequent demise.
In a recommendation submitted Friday to US District Judge Alvin Hellerstein in Manhattan, lawyers for Hwang argued that prosecutors failed to prove Archegos’s trading activity caused losses separate from other independent factors. They also contended that no incarceration is appropriate based on their client’s age, health and personal history.
The defense attorneys said Hwang suffers from cardiovascular disease and that his doctors have recommended open heart surgery. They asked the judge to take into account “his lifetime of service to others, the obstacles he struggled to overcome, and his extraordinary charitable work and giving.”
Prosecutors will submit their own sentencing recommendation for Hwang and are likely to ask Hellerstein for significant prison time. Friday’s filing cited US sentencing guidelines calling for a range of 46 months to 57 months for Hwang.
Hwang’s lawyers were critical of a calculation by the US probation office that points to sending him to prison for life, saying it “massively overstates the seriousness of the offense in this case.”
Archegos Chief Financial Officer Patrick Halligan was also convicted of fraud and racketeering and will be sentenced in January.
Archegos bought swaps in a relatively small number of companies, most notably ViacomCBS, which the government said was part of a scheme to manipulate those fairly illiquid stocks. The firm told banks that it was investing in large-cap tech giants like Apple Inc. and Amazon.com Inc. but in reality poured any additional money that it raised into the same positions that it held across Wall Street.
Former Archegos head trader William Tomita and risk head Scott Becker testified against Hwang and Halligan at trial, saying they were directed to lie to banks. Both men previously pleaded guilty to fraud and cooperated with prosecutors in hopes of receiving leniency for their crimes.
Hwang’s defense team argued at trial that he truly believed in the companies in which Archegos was invested and said his trading was part of a long-term strategy. They had planned to point the finger back at the banks, saying they were sophisticated financial players who took their own risks, but Hellerstein blocked Hwang’s lawyers from employing a “blame the victim” defense.
The massive losses suffered by the banks raised serious questions about how they assessed the risks of taking on and extending credit to trading clients like Hwang and Archegos, neither of whom was well-known on Wall Street.
The case is US v. Hwang, 22-cr-240, US District Court, Southern District of New York (Manhattan).
(Updates with sentencing guidelines in sixth paragraph.)
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