Christian Billionaire Bill Hwang Found Guilty of Wall Street Fraud

Hwang also faces lawsuit against his philanthropic foundation

Once one of the wealthiest evangelicals in the U.S., celebrated as part of a “new evangelical donor-class,” Sun Kook (“Bill”) Hwang now faces the possibility of life behind bars.

Bill Hwang

On July 10, after a grueling eight-week trial that parsed the complexities of finance law, a New York jury found Hwang guilty of racketeering, securities fraud, market manipulation and wire fraud. The jury convicted him on all but one of 11 counts, each of which carries a maximum 20-year sentence.

Hwang’s fall from grace came in March 2021, when his now-defunct Archegos Capital Management firm’s high risk investments led to the sudden erasure of $100 billion in stock market value from companies such as ViacomCBS and Tencent. Banks that had given loans to Archegos lost $10 billion, while Archegos itself lost $36 billion.

Federal prosecutors linked this collapse to Hwang’s strategy of heavily but indirectly investing in a small number of companies through the use of a type of derivative contract called a “swap.” A bank extends a credit line tied to the value of specific shares, and if the value of the shares drops, the bank can demand more cash to cover the difference. But when the banks came calling for cash in 2021, Hwang did not have the money. This crisis triggered a domino effect of stock sell-offs and plummeting values.

The massive losses put a target on Hwang, who already had a criminal record from a 2012 fraud conviction involving his previous hedge fund, Tiger Asia. Prosecutors portrayed Archegos as a criminal enterprise brazenly deceiving banks about the level of risk while artificially inflating stock values.

Hwang “lied about Archegos’s positions in these companies and just about every other materially important metric investment banks would use in determining the firm’s creditworthiness,” said U.S. attorney Damian Williams.

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However, the prosecution faced an uphill battle to prove that Hwang’s actions constituted actual crimes. One drawback was the question of motive.

“What was in it for him?” asked the presiding judge, Alvin Hellerstein. “He lost his money.”

The defense argued Hwang’s intent was not to manipulate stock values; rather, he “bought these stocks because he loved them.” Attorneys also hammered the prosecution for having “no theory” of how he hoped to benefit from the scheme.

Unable to present the case as a “pump and dump” scheme, the prosecution came up with the phrase “pump and brag” to describe the alleged crime, since Hwang never dumped his investments.

However, the judge blocked the defense from describing the prosecution’s argument as “novel,” and the jury ultimately found the evidence sufficient to convict beyond a reasonable doubt. The defense declined to say whether it will appeal the ruling as Hwang remains free pending sentencing on a $100 million bond.

In a separate civil case, a former Archegos managing director is continuing a lawsuit against Hwang’s Grace and Mercy Foundation, which was closely tied to the firm. Prior to Archegos’s financial collapse, Grace and Mercy had donated more than $80 million to a variety of Christian ministries, including Luis Palau Association, Prison Fellowship and InterVarsity Christian Fellowship.

Brendan Sullivan, who testified against Hwang in the criminal case, is seeking $30 million he claims he is owed by the foundation. He said he and other employees were forced to put their bonuses into a fund the firm then invested in stocks and donated to Grace and Mercy, which sold the stocks for profit. That arrangement allowed Archegos to benefit from a tax deduction, while Grace and Mercy was exempt from capital gains taxes.

According to the lawsuit, “These share transfers to the foundation were all coming from the Archegos Fund, which included employee deferred compensation…which was done without the knowledge or consent of employees.”

An attorney for Grace and Mercy told Christianity Today, “Mr. Sullivan’s complaint against The Grace and Mercy Foundation is filled with baseless and frivolous allegations, all of which will be decisively refuted in court,” adding that the foundation would continue its grantmaking work.

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