The Man Who Lost $36 Billion in a Week

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 Bill Huang. He may not be as well known, but the outcome of his case could have huge implications for

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.

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 his innocence. Huang is not your typical hedge fund billionaire. He's a devout Christian who has poured hundreds of millions

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 and his Adida's flip flops.

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 made his name on Wall Street, but Bloomberg Street are not. Aurajan, says. Wang's story starts half a world away.

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.

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.

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.

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.

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.

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.

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 that you were going to go short. And he did tell them when you really had conviction, to really lean into those positions.

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.

People really respected him, and then he had a little run in with the authorities in both Asia and in the US.

Tiger Asia pleaded guilty to wire fraud, and Wang settled civil charges of insider trading without admitting fault.

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 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.

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 Burton says it also has another connotation.

It's often a word that people use for Jesus Christ.

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.

Jesus says, I'm the bread of life.

If you come to me, who'll never be hungry again.

Your people will be my people, and your God.

Will be my God.

My company does a little bit of our part bringing the fair price.

To Google stock price.

Is it important to God?

Absolutely?

Kathy and sriese Huang's religious conviction made him extremely comfortable with risk.

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 is scary. Clearly he wasn't scared by it. Clearly he wasn't odd by it. When it comes to his investing style.

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.

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.

Wong did this most notably with ViacomCBS. He'd borrow money from a bank and that bank bought the shares.

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.

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.

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.

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 was able to take on extremely large stakes in public companies under the radar.

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.

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 one when there was a problem with ViacomCBS.

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, and so we can definitely do that. We can definitely sell that.

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.

And that really started the panic.

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 and Morgan Stanley were among the hardest hit, but Credit Suite lost the most, more than five and a half

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 credit sweet issue, but we certainly had higher exposures than others.

Ultimately, that idiosyncratic situation contributed to the end of that storied Swiss bank.

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.

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.

Market manipulation, wire fraud, racketeering, racketeering. Those were charges put in place originally to take down mob bosses.

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, spoke to reporters about the king in April of twenty twenty two.

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.

The US Adney for the Sudden District is not wrong when he says this is a historic case, right.

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.

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.

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.

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.

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.

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.

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.

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.

It raises more questions about Huang's motivations, questions we could get answers to. Kathy says during the trial, what was his exit strategy?

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.

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.

He was very polite.

He'd offered us chair, he brought us water, and then at the end of the conversation he politely asked us never to return.

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.

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 they might have to do more reporting.

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.

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 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.