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Balzac wrote, “behind every great fortune is a crime.” Well, Bill Hwang’s fortune was incredibly great, for a while, anyway, rising from just $1.5 billion to $35 billion in the space of a year. And Manhattan U.S. Attorney Damian Williams is convinced that didn’t happen honestly, charging Hwang and the former CFO of his now-notorious family office, Archegos Capital Management, with fraud and racketeering. And not just any fraud: One “historic in scope,” that cost Archegos’ banks $10 billion (in spite of their best efforts and possible own fraud seeking to avoid them) and may just have threatened the whole of the global economy.

Here's the thing, though: Hwang & co. didn’t allegedly do any insider-trading or pumping-and-dumping or resorting to nefarious schemes to hide their more than 50% (!) stake in ViacomCBS and smaller but still-eyewatering interests in a whole host of other large companies. They didn’t have to: As a family office, Archegos isn’t subject to any particularly onerous disclosure requirements, and since those stakes were composed mostly of swaps arranged by essentially every major bank on earth, he wouldn’t have had to, anyway. None of which is illegal, any more than moving markets by making large purchases, criminalization of which would land every single person on Wall Street in jail tomorrow. So Williams, the Securities and Exchange Commission and the Commodity Futures Trading Commission have to find a way to make them illegal, and their theory is it was all illegal because Hwang, et. al., took to stretching the truth a bit with the banks only too eager to extend them all kinds of leverage.

Archegos made swaps deals with a number of banks including Credit Suisse, Nomura, Morgan Stanley and UBS, and prosecutors said Mr. Hwang, Mr. Halligan and others at the firm had made “materially false and misleading statements” to conceal the extent of its bets…. “They lied about how big Archegos’s investments had become; they lied about how much cash Archegos had on hand; they lied about the nature of the stocks that Archegos held,” Mr. Williams said. “And we allege that they told those lies for a reason: so that the banks would have no idea that Archegos was really up to a big market-manipulation scheme.”

Not that they seemed to care enough to put any effort into checking into the validity of those statements, but it’s nice to know some prosecutors still think lying to banks shouldn’t be allowed. Of course, Hwang and his alleged co-conspirators (well, his one remaining alleged co-conspirator, anyway) aren’t having any of it.

“We are extremely disappointed that the U.S. Attorney’s Office has seen fit to indict a case that has absolutely no factual or legal basis; a prosecution of this type, for open-market transactions, is unprecedented and threatens all investors,” said Lawrence Lustberg, a lawyer at Gibbons who is representing Hwang.

The indictment names two former Archegos employees, Scott Becker and William Tomita, as part of the scheme. Both have pleaded guilty and are cooperating with the federal prosecution, said Mr. Williams….

Also cooperating is Archegos biggest “victim,” Credit Suisse, albeit in an entirely different matter, one that continues to cast a pall on an already very pallid bank.

Credit Suisse told CNBC on Wednesday that U.S. authorities will “absolutely not” find any evidence of wrongdoing as it faces a probe of its compliance with sanctions on Russian oligarchs…. CEO Thomas Gottstein said Wednesday that the letter received by investors had “nothing to do” with sanctions or loans belonging to members of President Vladimir Putin’s inner circle.

″[It] has nothing to do with destroying materials related to sanctions,” Gottstein told CNBC’s Geoff Cutmore.

The bank posted a $284 million net loss for the first quarter, mainly because of $730 million in provisions for lawsuits./At the end of the quarter, its main capital ratio slipped to 13.8%—from 14.4% at the end of December—and below a bank-set 14% target. Unless the bank returns to profitability, the drop in its capital could weigh on its ability to conduct buybacks and pay dividends./Results for the same quarter a year earlier were saddled by $5 billion in losses from exiting stock positions of family office Archegos Capital Management.

Archegos owner Bill Hwang and former CFO Halligan plead not guilty to U.S. fraud charges [CNBC]
Archegos stock manipulation scheme was ‘historic,’ U.S. attorney says. [NYT]
Archegos Founder Bill Hwang, Former CFO Charged With Securities Fraud [WSJ]
Credit Suisse says U.S. authorities will ‘absolutely not’ find any wrongdoing amid probe into Russian oligarch record shredding [CNBC]
Credit Suisse Loss Eats Into Capital Buffers [WSJ]

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