(Fortune) - Staff at family office Archegos Capital Management were reportedly "yelled" at by their boss, Sung Kook “Bill” Hwang, for taking bathroom breaks while the firm was allegedly orchestrating market manipulations.
Hwang is currently on trial in New York charged with racketeering and fraud offenses related to a $36 billion "house of cards" market manipulation scheme. Hwang has pleaded not guilty to the charges.
The bathroom ban claim was made by Archegos's former head trader William Tomita, who pled guilty to his connection with the apparent scheme and is now assisting the government with its investigations.
In the criminal trial prosecuted by Damian Williams, U.S. attorney for the Southern District of New York, Tomita told jurors Hwang "yelled" at his small team if they stepped away to use the bathroom while a stock he was interested in was moving.
“He raised his voice, and he yelled at us that we can’t just go to the bathroom,” Tomita said in court on Tuesday, per Bloomberg.
Hwang's diktat of a bathroom ban during important trades also seemingly applied when traders were in their own homes. Tomita said that at one point the Archegos team was working remotely during the pandemic—in its civil case the SEC alleges the criminal behavior occurred between "at least" March 2020 to March 2021—and when one trader didn't appear on screen because he was in the bathroom, Hwang was furious.
But Hwang, who was born in Korea and moved to the U.S. in the early 1980s, also often berated staff if their work didn't go the way he wanted—according to Tomita.
One stock in particular that New York-based Archegos was allegedly manipulating was mass media conglomerate Viacom. Williams's team wrote it believes "by March 24, 2021, Hwang effectively controlled more than 50% of the freely trading shares of Viacom—and no one outside of Archegos knew about it—not investors purchasing Viacom in the market, or the executives at Viacom itself, or even the banks and brokerages who held the stock as part of the swaps.
"Because, as alleged, by using various banks and brokerages for his swaps, Hwang made sure that no single institution would have any idea that he was behind all of this trading."
Tomita said he was blasted by his boss—whose net worth was more than $35 billion before the collapse of Archegos, per the New York Times—for not trading the stock the way Hwang wanted.
According to Bloomberg, Tomita said: “I remember with the stock Viacom, getting yelled at because I wasn’t aggressive enough. I wasn’t buying it in a manner that was moving the stock price as high as he wanted.”
The former trader added: "Sometimes he didn’t even need to vocalize because on the Zoom he would just glare, and that glance alone meant we were about to get yelled at or he was annoyed."
Hwang also reportedly gloated about the fraudulent successes he had pushed on his team. For example, Tomita said that when Viacom stock rose 25% in March 2021 and the media company's executives celebrated the pop, Hwang declared to the trader the rise "was because of us."
Representatives for Hwang did not immediately respond to Fortune's request for comment.
In brief: The case against Hwang
In April 2022, Williams's office charged Hwang, as well as Patrick Halligan, Archegos’s chief financial officer, with racketeering conspiracy, securities fraud, and wire fraud offenses. The pair have pleaded not guilty.
The suit alleges that they, as well as Tomita and former chief risk officer Scott Becker, manipulated the price of publicly traded stocks to swell the value of the Archegos portfolio, and lied to banks in order to get cash to inflate the stock's prices even further. Becker and Tomita entered guilty pleas on April 21, 2022 and are working with the government.
The organization was listed as a family office as opposed to a Wall Street fund, which meant it wasn't subject to the same level of scrutiny as its peers in the brokerage world.
Williams said: "In one year, Hwang allegedly turned a $1.5 billion portfolio and pumped it up into a $35 billion portfolio. But last year, the music stopped. The bubble burst. The prices dropped. And when they did, billions of dollars of capital evaporated nearly overnight.”
This "burst" had massive ramifications for the banks that had been involved with Archegos. Credit Suisse, for example, was fined approximately $111 million by U.K. regulators for "significant failures" in risk management and governance between January 2020 and March 2021 in connection with the firms’ exposure to Archegos.
The U.K.'s Prudential Regulation Authority (PRA) added that when Archegos defaulted in March 2021, Credit Suisse was exposed to $5.1 billion in losses.
By Eleanor Pringle
