Archegos Capital Management CFO Patrick Halligan was sentenced to eight years in prison for defrauding banks ahead of and during the 2021 collapse of Bill Hwang’s $36 billion family office.
Halligan’s sentence Jan. 27 was considerably lower than the 18 years Hwang received in November. Though both men were convicted last July of misleading banks into providing Archegos with billions of dollars in trading capacity, Hwang was also found guilty of market manipulation.
U.S. District Judge Alvin Hellerstein said Halligan, 48, deserved a lower a sentence than Hwang, who he called the “dynamic force of Archegos.” The chief financial officer, “understood the consequences, but he didn’t instigate them.”
Federal prosecutors said in a court filing ahead of sentencing that the chief financial officer was “far less culpable than Hwang” but stressed that he nonetheless played a critical role. “Hwang did not involve Halligan in the trading, but Hwang’s trading could not have happened without Halligan’s help,” the government said.
Former Archegos risk head and cooperating witness Scott Becker testified at trial that Halligan trained him to lie to banks about the firm’s financial condition to maximize its available credit. When Archegos’ downward spiral began, Halligan came up with talking points to try to stave off the banks’ margin calls. Hwang’s firm was experiencing “a liquidity issue, not a solvency one,” Becker said he and others were instructed to tell counterparties.
Archegos’ crash contributed to the downfall of Credit Suisse Group, and led to billions of dollars in losses at other banks, including Morgan Stanley, UBS Group and Nomura Holdings.
Both prosecutors and Halligan’s lawyers had recommended Hellerstein impose an eight-year sentence. In urging the judge not to hand down a longer prison term, defense lawyers pointed to the fact that the main Archegos victims were large Wall Street banks. They contrasted them with the “vulnerable individual victims such as Holocaust survivors” that were the victims of Bernard Madoff’s Ponzi scheme. Madoff was sentenced to 150 years in prison.
At trial, Halligan’s lawyers tried to argue that he pushed back on reckless trading at Archegos. They also suggested that Becker’s testimony was motivated by personal animosity towards his former bosses. In 2018, Becker wrote in an email that he wished Halligan would die in a plane crash. Two years later, he suggested the he would like to see both Hwang and Halligan “die painful, slow deaths” from COVID.
Becker was one of two former Archegos employees who testified as star witnesses for the government. Former head trader William Tomita testified about how Hwang manipulated markets by directing his team to try to reach price targets that often changed minute by minute, using “very aggressive” algorithmic trading techniques to dominate trading in a handful of stocks.
Becker and Tomita have not yet been sentenced. They are hoping for lenient treatment based on their cooperation with the government.
Like Hwang, Halligan 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, a onetime hedge fund manager who served time in prison 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 turned his life over to Christ and was looking forward to “healing” in prison.
The case is US vs. Hwang, 22-cr-240, U.S. District Court, Southern District of New York (Manhattan).
