May 6, 2024 • 17 mins
Bill Hwang amassed a fortune of $36 billion on Wall Street through his family office, Archegos Capital Management. But over the course of one week in 2021, the firm imploded. Federal prosecutors have since charged Hwang with 11 criminal counts, including securities fraud, wire fraud and racketeering.
Today, Bloomberg’s Sridhar Natarajan and Kathy Burton join host David Gura to discuss Hwang’s rise and fall and why his trial promises to be one of the biggest, and most interesting, in the history of Wall Street.
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Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news. There's spent a lot
of action recently in the courts in New York City.
A former president is one defendant. The one time golden
Boy of Crypto was found guilty of fraud, and this
week another major trial gets under way. The defendant is
(00:23):
Bill Huang. He may not be as well known, but
the outcome of his case could have huge implications for
how Wall Street does business. Huang, a former hedge fund manager,
is accused of committing fraud and market manipulation on a
massive scale and contributed to the collapse of one of
the world's largest banks. Bloomberg Street. Ar Notturajan says, our
(00:44):
Kago's capital management imploded in just a matter of days.
Speaker 2 (00:48):
We're talking about his investment firm that had net capital
of thirty six billion. That was the Tuesday of that week,
and by the end of the week practically zero.
Speaker 1 (00:59):
Perhaps phaps no financier's fortune has disappeared so quickly. Quang's
company Arcagos went busted in twenty twenty one, and now
Huang is accused of committing securities fraud and wire fraud
along with racketeering. Eleven charges in total and if he's convicted,
Huang could go to prison for twenty years. He maintains
(01:21):
his innocence. Huang is not your typical hedge fund billionaire.
He's a devout Christian who has poured hundreds of millions
of dollars into a religious charity he started. Wang shies
away from the spotlight, but what really sets him apart
is his modest profile. Street Arnaut Rajahan and Bloomberg's Kathy
Burton have chronicled Bill Wang's career for years, and after
(01:41):
Archagos collapsed, Kathy and Sried drove Tohuang's house in New
Jersey with a request for comment.
Speaker 3 (01:48):
We didn't think he would be there, and then we
walked up to his house and we were going to
put a handwritten note in the door, and we heard
a voice and there was Bill sitting on his porch
in a plastic chair from Costco at a plastic table,
sitting there like some normal suburban guy on his porch
(02:10):
and his Adida's flip flops.
Speaker 1 (02:14):
That's where Wang has been holed up awaiting the start
of his trial, which is likely to be a blockbuster.
Today on the show The Rise and Fall of Bill Wang,
who he was how he made his money and lost it,
and Wi Wang's trial promises to be one of the
biggest and most interesting in the history of Wall Street.
This is the big take. I'm David Gurat. Bill Wong
(02:40):
made his name on Wall Street, but Bloomberg Street are not. Aurajan, says.
Wang's story starts half a world away.
Speaker 2 (02:47):
So let's go all the way back to nineteen sixty four.
Son of a Korean pastor, lived in South Korea for
much of his early life, middle class family from whatever
we can gather out there.
Speaker 1 (02:59):
When Wang was eighteen, his family moved from South Korea
to Las Vegas. He went to college at UCLA and
after graduation he got his first job in finance.
Speaker 2 (03:09):
Didn't really break into one of those top rung Wall
Street shops, not the Wall Street elite, not the Goldmans
of the Morgan Stanleys, but got his break with something
called Hyundai Securities.
Speaker 1 (03:18):
And while he was working there, Wang caught the attention
of the billionaire hedge fund manager Julian Robertson, the founder
of the firm Tiger Management.
Speaker 3 (03:27):
Jillian was a huge, huge name. He was the stock
picking king and what stood out about Bill was that
he brought Julian all these ideas about South Korean stocks,
which Jullian didn't really have any expertise in.
Speaker 1 (03:42):
Quang became one of Robertson's proteges, part of a small
group of young traders at Tiger Management known as the
Tiger Cubs. Robertson mentored them they followed in his footsteps.
Speaker 3 (03:53):
I think it was what Julian taught them about picking
stocks and what he taught them about risk, so which
is kind of ironic given what happened to Bill afterwards.
But he really told them to pick the best companies,
the best management, and those you would go along. And
the worst companies were the worst managements were the ones
(04:13):
that you were going to go short. And he did
tell them when you really had conviction, to really lean
into those positions.
Speaker 1 (04:20):
Robertson gave Wang money to start Tiger Asia, and Kathy
says that firm's success made Wang a big deal on
Wall Street in his own right.
Speaker 3 (04:30):
People really respected him, and then he had a little
run in with the authorities in both Asia and in
the US.
Speaker 1 (04:39):
Tiger Asia pleaded guilty to wire fraud, and Wang settled
civil charges of insider trading without admitting fault.
Speaker 2 (04:46):
This is a big setback, right. His hedge fund admitted
wire fraud, he settled civil claims with the sec has
to return all day outside investor money. That's a big
setback for anyone. You have to if you've been in
the industry, you've had a reasonable amount of success, and
you have this kind of setback, that is it. You
(05:06):
walk away from it. But Bill gets a second chance,
mostly by virtue of the fact that he still had
some money left allows him to start his family office.
Speaker 1 (05:15):
Family offices invest the money of one person or one family.
Unlike hedge funds, they can't invest money on behalf of
other clients, and they're not subject to the same regulations
or disclosure rules big families like the DuPonts and the
Rockefellers have them. Quang called his Archago's capital management Urkego's
his Greek it means prince or leader, but Bloomberg Kathy
(05:37):
Burton says it also has another connotation.
Speaker 3 (05:40):
It's often a word that people use for Jesus Christ.
Speaker 1 (05:46):
Throughout his career, Huang has poured part of the proceeds
from his investments into the Grace and Mercy Foundation, that's
a Christian charity. He started in two thousand and six.
On its website, Grace and Mercy describes itself as a
private grant making foundation focused on supporting the poor and
oppressed and helping people learn, grow and serve. Sri says.
(06:07):
It also promotes public reading of the Bible, something near
and deer to Quang, who is known as a Christian
capitalist known for quoting Scripture in meetings.
Speaker 4 (06:16):
Jesus says, I'm the bread of life.
Speaker 5 (06:22):
If you come to me, who'll never be hungry again.
Speaker 1 (06:25):
Your people will be my people, and your God.
Speaker 5 (06:29):
Will be my God.
Speaker 2 (06:32):
My company does a little bit of our part bringing
the fair price.
Speaker 5 (06:37):
To Google stock price.
Speaker 2 (06:39):
Is it important to God?
Speaker 5 (06:41):
Absolutely?
Speaker 1 (06:44):
Kathy and sriese Huang's religious conviction made him extremely comfortable
with risk.
Speaker 2 (06:49):
You move into the spot where you make these highly
concentrated bets. You are talking about your top ten investments,
where in some of these names, fifty sixty seventy percent
of the overall holdings that name is just this one person,
not one giant firm with hundreds of institutional investors, One
person having such an outsized influence that in some ways
(07:13):
is scary. Clearly he wasn't scared by it. Clearly he
wasn't odd by it. When it comes to his investing style.
I think it would not be wrong to say he
almost operated with the flare of a reckless gambler.
Speaker 1 (07:28):
Three says for a long time that risk taking paid off.
Wong made tens of billions of dollars in the stock
market with highly leveraged bets.
Speaker 2 (07:37):
Goes to the bank and says, here, I will put
up some money, you give me some leverage, you go
out and buy that stock.
Speaker 1 (07:43):
Wong did this most notably with ViacomCBS. He'd borrow money
from a bank and that bank bought the shares.
Speaker 2 (07:51):
It will come under your name. If the price goes up,
I get the money. If the price goes down, you
get the money. I will pay you money.
Speaker 1 (08:00):
And there was no public record of Wang actually doing this.
Huang was making deals like this at several different banks
to the tune of billions of dollars, but none of
them knew the scope and the scale of Quang's investments.
Speaker 2 (08:13):
It meant a lot of lucrative fees, which is why
they were willing to do business with them, which is
why they saw him as a prized client.
Speaker 1 (08:21):
By going around to a bunch of different lenders and
making these kinds of deals, Huang was able to amass
bigger and bigger positions in companies he believed in, which
drove up their stock prices, and he turned two hundred
million dollars into more than thirty six billion. Because of
the way these transactions were structured, and because family offices
are not subject to very stringent disclosure rules, Teresa Swang
(08:42):
was able to take on extremely large stakes in public
companies under the radar.
Speaker 2 (08:47):
If you're going out there in open market buying the
stock straight up, you can't hold more than five percent. Well,
you can hold more than five percent, but you have
to disclose that.
Speaker 1 (08:56):
But because of his situation, Huang became effectively via commcbs's
single largest shareholder without setting off any alarm bells. So
long as the stock price has kept rising, Huang kept
making money, so did the banks, and the companies he
invested in saw their share prices skyrocket because of Wang's investments.
But Kathy says that changed in March of twenty twenty
(09:18):
one when there was a problem with ViacomCBS.
Speaker 3 (09:22):
Their price was going up so much because of Bill,
but they didn't know that that they decided to do
a secondary offering in the stock. That's usually usually something
that depresses the price of the stock because there's more supply.
And the bankers thought, oh, well, there are these you know,
the stock keeps going up, there's people ready to buy,
(09:44):
and so we can definitely do that. We can definitely
sell that.
Speaker 1 (09:48):
The problem was they couldn't. They didn't know Huang was
responsible for the bulk of the buying. ViacomCBS's stock price
started to crater.
Speaker 3 (09:58):
And that really started the panic.
Speaker 1 (10:01):
The banks went to Huang and said basically, hey, the
stock price is going down and you need to pay us.
He couldn't, and our Kegos imploded. Over the course of
a week, Huang's fortune vanished. It went from more than
thirty six billion dollars to practically nothing, and the shock
waves from his firm's collapse rocked global markets. No Mura
(10:21):
and Morgan Stanley were among the hardest hit, but Credit
Suite lost the most, more than five and a half
billion dollars. In the aftermath, Thomas Gottstein, the bank CEO,
went on Bloomberg TV to explain what happened.
Speaker 4 (10:35):
Our Kagos was a situation that is now being reviewed
also by US regulators that it was a very syncratic
situation with a family office which had some deficiencies in
terms of disclosure. So it was certainly not only a
(10:55):
credit sweet issue, but we certainly had higher exposures than others.
Speaker 1 (11:02):
Ultimately, that idiosyncratic situation contributed to the end of that
storied Swiss bank.
Speaker 2 (11:09):
Two years later, Credit Swiz doesn't exist. The cause of
death for Credit Swiez may not be listed as archagoes,
but it certainly played a big role in that.
Speaker 1 (11:20):
And prosecutors have resolved to hold Bilhuang to account three says.
The Justice Department unsealed a string of charges against him
in twenty twenty two, including.
Speaker 2 (11:30):
Market manipulation, wire fraud, racketeering, racketeering. Those were charges put
in place originally to take down mob bosses.
Speaker 1 (11:38):
The start of bil Wang's trial and what's at stake
for Wall Street is after the break bil Wang's trial,
it's expected to last six to seven weeks. The US
government has charged Twang with eleven criminal counts. Damian Williams,
the US Attorney for the Southern District of New York,
(11:58):
spoke to reporters about the king in April of twenty
twenty two.
Speaker 5 (12:02):
Today, the UNCO racketeering and conspiracy Securities drawd buyer fraud
and marketing infomation charges against Kill Wong, the founder of
Our Chigo's Capital Management. This scheme was a historic scope.
Speaker 2 (12:17):
The US Adney for the Sudden District is not wrong
when he says this is a historic case, right.
Speaker 1 (12:23):
That's Bloomberg reporter Shridar Noturajan Sree says, the prosecution will
argue that Wang hid the size of his investments in
his quest to drive share prices higher. The side stepped
limits banks ordinarily have in place.
Speaker 2 (12:36):
He was butting up against those limits. He would reassure
those banks saying, don't worry, I don't have similar positions elsewhere.
Prosecutors say that was a lie now that we know
the portfolio. If he actually said that, or as team
said that, that would have been a lie.
Speaker 1 (12:50):
Sree says. Something else prosecutors have seized on is Swang's
argument that if he needed to liquidate a position to
sell some of that stock quickly, he could.
Speaker 2 (13:00):
You look at the fact that he also said, don't worry,
I can also get out of these trades easily without
overwhelming the markets. Prosecutors say also lie because of the
size of the positions he'd built to get out in
that timeframe would have meant flooding the market with those securities,
which would have led to major adverse price action.
Speaker 1 (13:21):
Selling all those shares all of a sudden would have
driven stock prices down dramatically, which is what played out
with ViacomCBS, whose stock lost more than half its value
as Our Chagos imploded. Kathy and three have been looking
into what Wang has been up to as he awaits trial.
Since he was indicted two years ago, Wang has become
(13:43):
even more invested in his religious charity, the Grace and
Mercy Foundation, which Three says has seen its assets grow
in recent years, which is pretty extraordinary.
Speaker 2 (13:54):
So if that five hundred and thirty million in assets
became seven eight hundred million, you'd actually going on one
of the better performing hedge funds.
Speaker 1 (14:03):
Turns out, it's become a lifeboat for some of the
men and women Huang worked with at Our Kagos who
lost their jobs. Many of them are now making more
than half a million dollars each at Grays and Mercy.
Speaker 2 (14:15):
A former employee has alleged to this. In some ways,
we're supposed to be golden handcuffs, and you try os
your legal risk and make sure that these people stay
on your side and don't go out there against you.
Speaker 1 (14:28):
It raises more questions about Huang's motivations, questions we could
get answers to. Kathy says during the trial, what was
his exit strategy?
Speaker 3 (14:36):
Did you think at some point everyone would come in
and say, oh, wow, these companies, we really want them,
so we're going to take them off your hands. It
makes no sense to me, and there's no apparent exit
strategy for him, so I just want to know what
he was thinking.
Speaker 1 (14:52):
Kathy and Sree tried to ask Huang about that directly
when they sat with him around that Costco table on
that visit to his house in New Jersey, where they
found him listening to a Christian audiobook.
Speaker 2 (15:03):
He was very polite.
Speaker 3 (15:04):
He'd offered us chair, he brought us water, and then
at the end of the conversation he politely asked us
never to return.
Speaker 1 (15:13):
The trial will fill in some gaps about what Bill
Wong did, but it could also affect how firms like
our Chagos operate and are regulated. There are thousands of
them in the US. Am I right to assume that
this is a trial that will be closely watched by
the heads of hedge funds and family offices, and if so,
what are they going to be watching for.
Speaker 3 (15:33):
I think that family offices is particularly interesting because it
is an area that has had less regulation, and I
think in the wake of this, definitely the SEC has
looked at that and proposed things. So far nothing has happened,
but I think that family offices are still concerned that
(15:56):
they might have to do more reporting.
Speaker 2 (15:58):
Will there be more disclosure woyments, Will there be a
way to figure out that something like this cannot be repeated.
That's where they will closely watch with a lot of
you know, professional nervousness, if you met.
Speaker 1 (16:11):
This trial is also an opportunity to learn more about
how some of the world's biggest banks could have been
blind to the full extent of what Quang was doing
and how they were left holding the bag. This is
the Big take from Bloomberg News. I'm David Gura. This
(16:34):
episode was produced by Alex Segura and David Fox. It
was edited by Stacy Vanick Smith and David Sheer. It
was mixed by Alex Sagura. It was fact checked by
Adriana Tapia. Our senior producers are Naomi Shaven and Kim Gittleson.
Our senior editor is Elizabeth Ponso. Nicole Beemster bor is
our executive producer. Sage Bauman is our Head of Podcasts.
(16:55):
Special thanks to Matt Goldman and Victoria Blackburn Danielle. Thanks
for listening. Please find FO and review The Big Take
wherever you listen to podcasts. It helps new listeners find
the show. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news. There's spent a lot
of action recently in the courts in New York City.
A former president is one defendant. The one time golden
Boy of Crypto was found guilty of fraud, and this
week another major trial gets under way. The defendant is
(00:23):
Bill Huang. He may not be as well known, but
the outcome of his case could have huge implications for
how Wall Street does business. Huang, a former hedge fund manager,
is accused of committing fraud and market manipulation on a
massive scale and contributed to the collapse of one of
the world's largest banks. Bloomberg Street. Ar Notturajan says, our
(00:44):
Kago's capital management imploded in just a matter of days.
Speaker 2 (00:48):
We're talking about his investment firm that had net capital
of thirty six billion. That was the Tuesday of that week,
and by the end of the week practically zero.
Speaker 1 (00:59):
Perhaps phaps no financier's fortune has disappeared so quickly. Quang's
company Arcagos went busted in twenty twenty one, and now
Huang is accused of committing securities fraud and wire fraud
along with racketeering. Eleven charges in total and if he's convicted,
Huang could go to prison for twenty years. He maintains
(01:21):
his innocence. Huang is not your typical hedge fund billionaire.
He's a devout Christian who has poured hundreds of millions
of dollars into a religious charity he started. Wang shies
away from the spotlight, but what really sets him apart
is his modest profile. Street Arnaut Rajahan and Bloomberg's Kathy
Burton have chronicled Bill Wang's career for years, and after
(01:41):
Archagos collapsed, Kathy and Sried drove Tohuang's house in New
Jersey with a request for comment.
Speaker 3 (01:48):
We didn't think he would be there, and then we
walked up to his house and we were going to
put a handwritten note in the door, and we heard
a voice and there was Bill sitting on his porch
in a plastic chair from Costco at a plastic table,
sitting there like some normal suburban guy on his porch
(02:10):
and his Adida's flip flops.
Speaker 1 (02:14):
That's where Wang has been holed up awaiting the start
of his trial, which is likely to be a blockbuster.
Today on the show The Rise and Fall of Bill Wang,
who he was how he made his money and lost it,
and Wi Wang's trial promises to be one of the
biggest and most interesting in the history of Wall Street.
This is the big take. I'm David Gurat. Bill Wong
(02:40):
made his name on Wall Street, but Bloomberg Street are not. Aurajan, says.
Wang's story starts half a world away.
Speaker 2 (02:47):
So let's go all the way back to nineteen sixty four.
Son of a Korean pastor, lived in South Korea for
much of his early life, middle class family from whatever
we can gather out there.
Speaker 1 (02:59):
When Wang was eighteen, his family moved from South Korea
to Las Vegas. He went to college at UCLA and
after graduation he got his first job in finance.
Speaker 2 (03:09):
Didn't really break into one of those top rung Wall
Street shops, not the Wall Street elite, not the Goldmans
of the Morgan Stanleys, but got his break with something
called Hyundai Securities.
Speaker 1 (03:18):
And while he was working there, Wang caught the attention
of the billionaire hedge fund manager Julian Robertson, the founder
of the firm Tiger Management.
Speaker 3 (03:27):
Jillian was a huge, huge name. He was the stock
picking king and what stood out about Bill was that
he brought Julian all these ideas about South Korean stocks,
which Jullian didn't really have any expertise in.
Speaker 1 (03:42):
Quang became one of Robertson's proteges, part of a small
group of young traders at Tiger Management known as the
Tiger Cubs. Robertson mentored them they followed in his footsteps.
Speaker 3 (03:53):
I think it was what Julian taught them about picking
stocks and what he taught them about risk, so which
is kind of ironic given what happened to Bill afterwards.
But he really told them to pick the best companies,
the best management, and those you would go along. And
the worst companies were the worst managements were the ones
(04:13):
that you were going to go short. And he did
tell them when you really had conviction, to really lean
into those positions.
Speaker 1 (04:20):
Robertson gave Wang money to start Tiger Asia, and Kathy
says that firm's success made Wang a big deal on
Wall Street in his own right.
Speaker 3 (04:30):
People really respected him, and then he had a little
run in with the authorities in both Asia and in
the US.
Speaker 1 (04:39):
Tiger Asia pleaded guilty to wire fraud, and Wang settled
civil charges of insider trading without admitting fault.
Speaker 2 (04:46):
This is a big setback, right. His hedge fund admitted
wire fraud, he settled civil claims with the sec has
to return all day outside investor money. That's a big
setback for anyone. You have to if you've been in
the industry, you've had a reasonable amount of success, and
you have this kind of setback, that is it. You
(05:06):
walk away from it. But Bill gets a second chance,
mostly by virtue of the fact that he still had
some money left allows him to start his family office.
Speaker 1 (05:15):
Family offices invest the money of one person or one family.
Unlike hedge funds, they can't invest money on behalf of
other clients, and they're not subject to the same regulations
or disclosure rules big families like the DuPonts and the
Rockefellers have them. Quang called his Archago's capital management Urkego's
his Greek it means prince or leader, but Bloomberg Kathy
(05:37):
Burton says it also has another connotation.
Speaker 3 (05:40):
It's often a word that people use for Jesus Christ.
Speaker 1 (05:46):
Throughout his career, Huang has poured part of the proceeds
from his investments into the Grace and Mercy Foundation, that's
a Christian charity. He started in two thousand and six.
On its website, Grace and Mercy describes itself as a
private grant making foundation focused on supporting the poor and
oppressed and helping people learn, grow and serve. Sri says.
(06:07):
It also promotes public reading of the Bible, something near
and deer to Quang, who is known as a Christian
capitalist known for quoting Scripture in meetings.
Speaker 4 (06:16):
Jesus says, I'm the bread of life.
Speaker 5 (06:22):
If you come to me, who'll never be hungry again.
Speaker 1 (06:25):
Your people will be my people, and your God.
Speaker 5 (06:29):
Will be my God.
Speaker 2 (06:32):
My company does a little bit of our part bringing
the fair price.
Speaker 5 (06:37):
To Google stock price.
Speaker 2 (06:39):
Is it important to God?
Speaker 5 (06:41):
Absolutely?
Speaker 1 (06:44):
Kathy and sriese Huang's religious conviction made him extremely comfortable
with risk.
Speaker 2 (06:49):
You move into the spot where you make these highly
concentrated bets. You are talking about your top ten investments,
where in some of these names, fifty sixty seventy percent
of the overall holdings that name is just this one person,
not one giant firm with hundreds of institutional investors, One
person having such an outsized influence that in some ways
(07:13):
is scary. Clearly he wasn't scared by it. Clearly he
wasn't odd by it. When it comes to his investing style.
I think it would not be wrong to say he
almost operated with the flare of a reckless gambler.
Speaker 1 (07:28):
Three says for a long time that risk taking paid off.
Wong made tens of billions of dollars in the stock
market with highly leveraged bets.
Speaker 2 (07:37):
Goes to the bank and says, here, I will put
up some money, you give me some leverage, you go
out and buy that stock.
Speaker 1 (07:43):
Wong did this most notably with ViacomCBS. He'd borrow money
from a bank and that bank bought the shares.
Speaker 2 (07:51):
It will come under your name. If the price goes up,
I get the money. If the price goes down, you
get the money. I will pay you money.
Speaker 1 (08:00):
And there was no public record of Wang actually doing this.
Huang was making deals like this at several different banks
to the tune of billions of dollars, but none of
them knew the scope and the scale of Quang's investments.
Speaker 2 (08:13):
It meant a lot of lucrative fees, which is why
they were willing to do business with them, which is
why they saw him as a prized client.
Speaker 1 (08:21):
By going around to a bunch of different lenders and
making these kinds of deals, Huang was able to amass
bigger and bigger positions in companies he believed in, which
drove up their stock prices, and he turned two hundred
million dollars into more than thirty six billion. Because of
the way these transactions were structured, and because family offices
are not subject to very stringent disclosure rules, Teresa Swang
(08:42):
was able to take on extremely large stakes in public
companies under the radar.
Speaker 2 (08:47):
If you're going out there in open market buying the
stock straight up, you can't hold more than five percent. Well,
you can hold more than five percent, but you have
to disclose that.
Speaker 1 (08:56):
But because of his situation, Huang became effectively via commcbs's
single largest shareholder without setting off any alarm bells. So
long as the stock price has kept rising, Huang kept
making money, so did the banks, and the companies he
invested in saw their share prices skyrocket because of Wang's investments.
But Kathy says that changed in March of twenty twenty
(09:18):
one when there was a problem with ViacomCBS.
Speaker 3 (09:22):
Their price was going up so much because of Bill,
but they didn't know that that they decided to do
a secondary offering in the stock. That's usually usually something
that depresses the price of the stock because there's more supply.
And the bankers thought, oh, well, there are these you know,
the stock keeps going up, there's people ready to buy,
(09:44):
and so we can definitely do that. We can definitely
sell that.
Speaker 1 (09:48):
The problem was they couldn't. They didn't know Huang was
responsible for the bulk of the buying. ViacomCBS's stock price
started to crater.
Speaker 3 (09:58):
And that really started the panic.
Speaker 1 (10:01):
The banks went to Huang and said basically, hey, the
stock price is going down and you need to pay us.
He couldn't, and our Kegos imploded. Over the course of
a week, Huang's fortune vanished. It went from more than
thirty six billion dollars to practically nothing, and the shock
waves from his firm's collapse rocked global markets. No Mura
(10:21):
and Morgan Stanley were among the hardest hit, but Credit
Suite lost the most, more than five and a half
billion dollars. In the aftermath, Thomas Gottstein, the bank CEO,
went on Bloomberg TV to explain what happened.
Speaker 4 (10:35):
Our Kagos was a situation that is now being reviewed
also by US regulators that it was a very syncratic
situation with a family office which had some deficiencies in
terms of disclosure. So it was certainly not only a
(10:55):
credit sweet issue, but we certainly had higher exposures than others.
Speaker 1 (11:02):
Ultimately, that idiosyncratic situation contributed to the end of that
storied Swiss bank.
Speaker 2 (11:09):
Two years later, Credit Swiz doesn't exist. The cause of
death for Credit Swiez may not be listed as archagoes,
but it certainly played a big role in that.
Speaker 1 (11:20):
And prosecutors have resolved to hold Bilhuang to account three says.
The Justice Department unsealed a string of charges against him
in twenty twenty two, including.
Speaker 2 (11:30):
Market manipulation, wire fraud, racketeering, racketeering. Those were charges put
in place originally to take down mob bosses.
Speaker 1 (11:38):
The start of bil Wang's trial and what's at stake
for Wall Street is after the break bil Wang's trial,
it's expected to last six to seven weeks. The US
government has charged Twang with eleven criminal counts. Damian Williams,
the US Attorney for the Southern District of New York,
(11:58):
spoke to reporters about the king in April of twenty
twenty two.
Speaker 5 (12:02):
Today, the UNCO racketeering and conspiracy Securities drawd buyer fraud
and marketing infomation charges against Kill Wong, the founder of
Our Chigo's Capital Management. This scheme was a historic scope.
Speaker 2 (12:17):
The US Adney for the Sudden District is not wrong
when he says this is a historic case, right.
Speaker 1 (12:23):
That's Bloomberg reporter Shridar Noturajan Sree says, the prosecution will
argue that Wang hid the size of his investments in
his quest to drive share prices higher. The side stepped
limits banks ordinarily have in place.
Speaker 2 (12:36):
He was butting up against those limits. He would reassure
those banks saying, don't worry, I don't have similar positions elsewhere.
Prosecutors say that was a lie now that we know
the portfolio. If he actually said that, or as team
said that, that would have been a lie.
Speaker 1 (12:50):
Sree says. Something else prosecutors have seized on is Swang's
argument that if he needed to liquidate a position to
sell some of that stock quickly, he could.
Speaker 2 (13:00):
You look at the fact that he also said, don't worry,
I can also get out of these trades easily without
overwhelming the markets. Prosecutors say also lie because of the
size of the positions he'd built to get out in
that timeframe would have meant flooding the market with those securities,
which would have led to major adverse price action.
Speaker 1 (13:21):
Selling all those shares all of a sudden would have
driven stock prices down dramatically, which is what played out
with ViacomCBS, whose stock lost more than half its value
as Our Chagos imploded. Kathy and three have been looking
into what Wang has been up to as he awaits trial.
Since he was indicted two years ago, Wang has become
(13:43):
even more invested in his religious charity, the Grace and
Mercy Foundation, which Three says has seen its assets grow
in recent years, which is pretty extraordinary.
Speaker 2 (13:54):
So if that five hundred and thirty million in assets
became seven eight hundred million, you'd actually going on one
of the better performing hedge funds.
Speaker 1 (14:03):
Turns out, it's become a lifeboat for some of the
men and women Huang worked with at Our Kagos who
lost their jobs. Many of them are now making more
than half a million dollars each at Grays and Mercy.
Speaker 2 (14:15):
A former employee has alleged to this. In some ways,
we're supposed to be golden handcuffs, and you try os
your legal risk and make sure that these people stay
on your side and don't go out there against you.
Speaker 1 (14:28):
It raises more questions about Huang's motivations, questions we could
get answers to. Kathy says during the trial, what was
his exit strategy?
Speaker 3 (14:36):
Did you think at some point everyone would come in
and say, oh, wow, these companies, we really want them,
so we're going to take them off your hands. It
makes no sense to me, and there's no apparent exit
strategy for him, so I just want to know what
he was thinking.
Speaker 1 (14:52):
Kathy and Sree tried to ask Huang about that directly
when they sat with him around that Costco table on
that visit to his house in New Jersey, where they
found him listening to a Christian audiobook.
Speaker 2 (15:03):
He was very polite.
Speaker 3 (15:04):
He'd offered us chair, he brought us water, and then
at the end of the conversation he politely asked us
never to return.
Speaker 1 (15:13):
The trial will fill in some gaps about what Bill
Wong did, but it could also affect how firms like
our Chagos operate and are regulated. There are thousands of
them in the US. Am I right to assume that
this is a trial that will be closely watched by
the heads of hedge funds and family offices, and if so,
what are they going to be watching for.
Speaker 3 (15:33):
I think that family offices is particularly interesting because it
is an area that has had less regulation, and I
think in the wake of this, definitely the SEC has
looked at that and proposed things. So far nothing has happened,
but I think that family offices are still concerned that
(15:56):
they might have to do more reporting.
Speaker 2 (15:58):
Will there be more disclosure woyments, Will there be a
way to figure out that something like this cannot be repeated.
That's where they will closely watch with a lot of
you know, professional nervousness, if you met.
Speaker 1 (16:11):
This trial is also an opportunity to learn more about
how some of the world's biggest banks could have been
blind to the full extent of what Quang was doing
and how they were left holding the bag. This is
the Big take from Bloomberg News. I'm David Gura. This
(16:34):
episode was produced by Alex Segura and David Fox. It
was edited by Stacy Vanick Smith and David Sheer. It
was mixed by Alex Sagura. It was fact checked by
Adriana Tapia. Our senior producers are Naomi Shaven and Kim Gittleson.
Our senior editor is Elizabeth Ponso. Nicole Beemster bor is
our executive producer. Sage Bauman is our Head of Podcasts.
(16:55):
Special thanks to Matt Goldman and Victoria Blackburn Danielle. Thanks
for listening. Please find FO and review The Big Take
wherever you listen to podcasts. It helps new listeners find
the show. We'll be back tomorrow
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Sarah Holder
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