Archegos CFO jailed for eight years for defrauding banks

(Bloomberg) — Archegos Capital Management Chief Financial Officer Patrick Halligan was sentenced to eight years in prison for defrauding banks before and during the collapse of Bill Hwang’s $36 billion family office in 2021 .

Harrigan’s sentence Monday was significantly lower than the 18 years Huang was sentenced to in November. While both men were convicted last July of misleading banks into providing billions of dollars of trading capabilities to Archegos, Hwang was also found guilty of market manipulation.

U.S. District Judge Alvin Hellerstein said Halligan, 48, should receive a lighter sentence than Hwang, whom he called “the dynamic force of Archegos.” The CFO “understood the consequences, but he didn’t instigate it.”

Federal prosecutors said in a court filing before sentencing that the chief financial officer’s “culpability was far less severe” than that of Hwang’s, but stressed that he still played a key role. “Mr. Huang did not involve Harrigan in the transaction, but Mr. Huang’s transaction would not have occurred without Harrigan’s help,” the government said.

Scott Becker, a former Archegos risk executive and cooperating witness, testified at the trial that Harrigan trained him to lie to banks about the company’s financial health to maximize its available credit. When Archegos began its downward spiral, Harrigan offered some talking points to try to stave off margin calls from banks. Becker said Huang’s company was experiencing “a liquidity problem, not a solvency problem” and that he and others were instructed to inform counterparties.

The collapse of Archegos led to the collapse of Credit Suisse Group AG and caused billions of dollars in losses at other banks including Morgan Stanley, UBS Group AG and Nomura Holdings Plc.

Both prosecutors and Harrigan’s attorney recommended that Hellerstein be sentenced to eight years in prison. In urging the judge not to impose a longer sentence, defense attorneys pointed out that Archegos’ main victims were large Wall Street banks. They contrasted them with “vulnerable individual victims, such as Holocaust survivors,” of Bernard Madoff’s Ponzi scheme. Madoff was sentenced to 150 years in prison.

At trial, Harrigan’s attorneys tried to argue that he objected to Archegos’ reckless dealings. They also said Becker’s testimony was motivated by personal animosity toward his former boss. In 2018, Becker wrote in an email that he hoped Halligan died in a plane crash. Two years later, he said he wanted to see both Huang and Halligan die a “painful and slow death” from COVID-19.

Becker is one of two former Archegos employees who testified as the government’s star witnesses. Former chief trader William Tomita testified about how Huang manipulated the market, directing his team to try to hit price targets that changed minute by minute, using “very aggressive” algorithmic trading techniques to dominate a handful of stocks. trade.

Becker and Tomita have not yet been sentenced. They hope to receive leniency on the basis of cooperation with the government.

Like Hwang, Harrigan was granted bail to appeal his conviction.

Hwang, a devout Christian, received support from fellow evangelicals during his trial and sentencing. On Monday, before the hearing began, Joseph “Chip” Skowron, the hedge fund manager who was jailed for insider trading, led about two dozen of Halligan’s family members and friends in prayer. .

Skowron told the judge at his 2011 sentencing that he had given his life to Christ and looked forward to “healing” in prison.

The case is US v. Hwang, No. 22-cr-240, United States District Court, Southern District of New York (Manhattan).

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