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The accusation came in a 12-page letter filed on Thursday night
in Manhattan federal court, where Archegos' owner Sung Kook
"Bill" Hwang has pleaded not guilty to 11 charges of fraud,
market manipulation and racketeering conspiracy.
Prosecutors said Archegos misled banks dozens of times in the
six months before its March 2021 demise about its liquidity and
how concentrated its portfolio was, in order to borrow money and
make huge bets on stocks through total return swaps.
The letter said Archegos' strained finances led to a March 24,
2021 meeting where senior executives including Hwang and
co-defendant Patrick Halligan, then its chief financial officer,
decided to falsely tell banks that the firm's inability to meet
margin calls was "a liquidity issue, not a solvency issue."
Officials allegedly conveyed that assurance to Credit Suisse
Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, Morgan
Stanley, Nomura Holdings Inc and UBS Group AG that night and the
next morning, and also misled counterparties about Archegos'
cash.
Those counterparties began unwinding Archegos' positions on
March 26, 2021. The New York firm's collapse caused about $10
billion of losses at banks including Credit Suisse and Nomura,
and wiped out more than $100 billion of shareholder value.
Lawrence Lustberg, a lawyer for Hwang, said in an email the new
accusations appeared to confirm that Hwang had "nothing to do"
with any misrepresentations to banks. He also said he was
confident the case would end in Hwang's "complete vindication."
Halligan's lawyer Mary Mulligan declined to comment. The banks
declined to comment or had no immediate comment.
Prosecutors said the letter will give Hwang and Halligan, who
has also pleaded not guilty to their April 2022 indictment,
"awareness of the types - and often the very words - the
government will use as examples" to prove their guilt at trial.
The next case conference is on Sept. 8. No trial date has been
set.
The case is U.S. v. Hwang et al, U.S. District Court, Southern
District of New York, No. 22-cr-00240.
(Reporting by Jonathan Stempel in New YorkAdditional reporting
by Saeed AzharEditing by David Holmes and Frances Kerry)
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