• Archegos Capital Management founder Sung Kook “Bill” Hwang’s trial is slated to begin Wednesday with jury selection. Archegos, a family office that managed Hwang’s assets, collapsed in March 2021. Reuters (LR: 3 CP: 5)
• Hwang, 60, faces 11 counts of racketeering, conspiracy, and fraud in a Manhattan court over his use of “total return swaps,” volatile financial instruments Archegos allegedly used to invest in stocks without owning them. CNN (LR: 2 CP: 5)
• Prosecutors claim that Hwang used the swaps to “artificially and dramatically” inflate various securities’ prices, resulting in Archegos’ value growing from $1.5B to $36B between March 2020 and March 2021. SEC.gov
• In one of the largest hedge fund blow-ups in years, Archegos’ collapse cost global banks $10B, including a $5.5B loss for Credit Suisse. According to prosecutors, shareholders of companies in Hwang’s portfolio lost more than $100B. US News & World Report
• Hwang’s lawyers are expected to argue that the government is pursuing a novel theory of market manipulation. The former hedge fund manager has pleaded not guilty and denies all charges. Reuters (LR: 3 CP: 5)
• Making their case to a jury, prosecutors could provide evidence of how Hwang sought “profitable off-ramps” for his Archegos trades and covertly committed acts he knew were unlawful. TheFinancialTimes

Narrative A:

• Hwang engaged in one of the most damaging market manipulation schemes in recent memory and must be held accountable for the billions of dollars he cost investors and financial institutions. By abusing risky financial instruments, Hwang’s attorneys will argue that none of his trades were unlawful. However, his systematic market abuse constituted a willful market manipulation to deceive investors.
  BETTER MARKETS

Narrative B:

• Though Bill Hwang didn’t manage his positions especially ethically while running Archegos, he didn’t commit any crimes. The government is trying to further punish him by pursuing novel market manipulation theories without precedent or legal standing. This trial could open the floodgates for prosecutors to punish all Wall Street firms and usher in arbitrary charges that aren’t based on the letter of the law.
  BLOOMBERG (LR: 3 CP: 5)

Nerd narrative:

• There’s a 50% chance that the next great financial crisis in the US will occur by 2029, according to the Metaculus prediction community.
  METACULUS (LR: 3 CP: 3)