Archegos Employees Entitled to $33 Million, Judge Says
The Wednesday order by US District Judge Alvin Hellerstein puts the 39 ex-Archegos staffers first in line for compensation from Hwang and the firm's former chief financial officer, Patrick Halligan, who were both convicted of fraud last year.
That's significant because the pair owe former Archegos trading partners — banks including UBS Group AG, Morgan Stanley and Nomura Holdings — $9.4 billion. Hwang, who was once worth more than $30 billion, lost most of his fortune when Archegos, his family office, imploded in 2021. His lawyers last year estimated his remaining net worth at around $55 million.
The ex-employees invested deferred compensation in Archegos, with some saying they felt coerced by Hwang into doing so.
There had been some controversy over whether some employees deserved to recover their losses. In January, Andy Mills, former co-chief executive officer, abandoned efforts to recoup losses from the firm's collapse after prosecutors claimed he was a 'knowing participant' and not a victim of Hwang's fraud. Mills was not charged over his actions at Archegos.
Prosecutors also said a senior analyst, David Park, was not a victim. Park worked with Hwang on a daily basis and 'had a front-row seat to Hwang's manipulative trading strategy,' according to the government.
But Hellerstein found that Park was a victim, saying he agreed with Park's testimony that he didn't falsify information, played no role in dealing with the defrauded banks and was unaware of the illegal scheme.
Hwang was sentenced to 18 years in prison for misleading banks into providing Archegos with trading capacity that steadily inflated the value of his highly concentrated portfolio until the bubble burst in March 2021. Archegos' collapse contributed to the demise of one of the biggest names in finance, Credit Suisse Group AG, and caused significant losses at Morgan Stanley, UBS, Nomura and others.
Lawyers for Hwang didn't immediately respond to messages seeking comment on the ruling. A lawyer for Halligan, who was sentenced to eight years, declined to comment.
Both are free on bail pending appeal. Hellerstein said Halligan's responsibility is capped at one-third of the total, citing Hwang's greater share of blame for the scheme.
The case is US v. Hwang, 22-cr-00240, US District Court, Southern District of New York (Manhattan).
(Corrects position of David Park. Previous versions of this story also corrected the case index number and spelling of Archegos throughout.)
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