Archegos founder Bill Hwang’s fraud trial draws to a close

(Corrects start date of trial in third bullet point and second paragraph, May instead of March)

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Prosecutors allege Hwang manipulated stock prices and lied to banks

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Hwang's lawyers argue the case is based on an aggressive market manipulation theory

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Archegos insiders testified at the trial that began in May

By Jody Godoy

July 8 (Reuters) - Prosecutors will argue on Monday that Sung Kook "Bill" Hwang should be convicted for his role in the 2021 collapse of his $36 billion fund Archegos Capital Management, as a trial draws to a close in a case that Hwang's lawyers have said is based on an overly aggressive theory of market manipulation.

The trial, which kicked off in May in Manhattan federal court, centers around the March 2021 implosion of Hwang's family office Archegos. The spectacular collapse left global banks nursing $10 billion in losses and allegedly caused more than $100 billion in shareholder losses at companies in its portfolio.

Prosecutors accuse Hwang of secretly amassing outsized stakes in multiple companies without actually holding their stock. Hwang lied to banks about the size of Archegos' derivative positions to borrow billions of dollars that he and his deputies then used to inflate the underlying stocks, prosecutors say.

"Bill Hwang was a billionaire and yet he risked nearly everything because he wanted more: more money, more success, more power," prosecutor Alexandra Rothman said during opening arguments.

Hwang, 60, has pleaded not guilty to one count of racketeering conspiracy and 10 counts of fraud and market manipulation. His lawyers have said the case is the "most aggressive open market manipulation case ever" brought by prosecutors.

Robert Frenchman, an attorney who has defended clients in market manipulation cases, said that while the government's theory is an "unorthodox" one, former Archegos insiders who testified at trial "have been very effective in telling a troubling story about lying by Archegos."

Witnesses testified to Archegos lying about the positions it held, the concentration of its portfolio and the extent of its borrowings, he said.

Archegos head trader William Tomita and Chief Risk Officer Scott Becker testified at the trial after pleading guilty to related charges and agreeing to cooperate with prosecutors.

Prosecutors say Hwang's deputy, Patrick Halligan, 47, also lied to banks and enabled the scheme. Halligan has pleaded not guilty to fraud and racketeering conspiracy.

According to the U.S. Attorney's Office for the Southern District of New York, which brought the case, Hwang's positions eclipsed those of the companies' largest investors, driving up stock prices. At its peak, prosecutors allege that Archegos had $36 billion in assets and $160 billion of exposure to equities.

When stock prices in March 2021 fell, the banks demanded additional deposits, which Archegos could not do. The banks then sold the stocks backing Hwang's swaps, wiping out $100 million in value for shareholders and $40 billion at the banks, including $5.5 billion for Credit Suisse, now part of UBS , and $2.9 billion for Nomura Holdings.

Hwang's attorney Barry Berke told jurors during opening arguments that his client staked his own cash on companies he believed in deeply, trading like he was prepared to lose it all. "The reason he did it was because he had the courage of his convictions," Berke said. Halligan's attorney, Mary Mulligan, said her client was not a risk-taker, but a bean counter who saw the firm's financial position as solid.

The banks Archegos traded with knew the risks and kept trading with the firm anyway to chase profit, Mulligan said.

If convicted, the men face maximum sentences of 20 years on each charge, though any sentence would likely be much lower and would be imposed by the judge based on a range of factors.

(Reporting by Jody Godoy in New York; Editing by Noeleen Walder and Matthew Lewis)