888 7th Avenue, the building that housed the Archegos offices. Photographer: Jeenah Moon/Bloomberg
He sits on the porch in a white plastic chair, a swing set out back, the lawn freshly mowed.
Here in suburban Tenafly, 15 miles from midtown Manhattan, few would guess that this unassuming figure is none other than Bill Hwang — the man who just lost more than US$20 billion ($27.12 billion).
“Billion with a B?” gasps a neighbour down the block, when told of the epic blowup at Hwang’s Archegos Capital Management.
Yes, billion, with a B, as shocked lenders can attest. Four months after Archegos rocked global finance, bankers and federal authorities are still sifting through the wreckage. The liquidator who mopped up after Lehman Brothers has now come for Archegos. Some colleagues have turned on Hwang; others hope he’ll bankroll hedge funds that might yet rise from the ashes.
US prosecutors are asking questions, too, including the big one: Was all of this another spectacle of Wall Street greed and hubris, or was it something worse? Credit Suisse Group AG, staggered by a US$5.5 billion blow, says it was likely deceived by Hwang’s family office.
Hwang is groping for answers of his own. He amassed one of the world’s great fortunes in virtual secrecy — and then lost it, very publicly, in a blink. In the easeful heat of this summer morning, he’s awaiting a call with a retired US general who, he hopes, might provide some counsel. He’s dressed like your average American soccer dad: teal shirt, blue cargo pants, Adidas slides. He has a pad of paper and a pen handy. An 8-ounce plastic bottle of Poland Spring water stands on the white plastic table which, like the chair, could have come from Costco.
At hand, too, is a Christian pamphlet — a testament to the faith that’s guided Hwang as he made dangerous bets in the markets and was even charged with insider trading in the past. The title is Armor of God, a reference to Ephesians 6:11 — “Put on the full armor of God, so that you can take your stand against the devil’s schemes.”
The neighbourhood surrounding the home of Bill Hwang in Tenafly New Jersey. Photographer: Christopher Occhicone/Bloomberg
Hwang is relaxed, self-deprecating and reflective in a brief conversation, but declines to discuss the Archegos fiasco or his next steps. He’s been lying low here in New Jersey, in this tidy borough of 15,000, beyond The Palisades cliffs that rise above the Hudson River. He is not exactly a Wall Street Napoleon exiled to Elba: Hwang has lived here for years, in the same house, with cobwebs in the eaves and hedges out front. A Mercedes sits in the driveway. “Black Lives Matter” signs dot neighbours’ manicured lawns. Homes on this tree-softened street tend to sell for a few million dollars — a modest price, for a billionaire.
It’s difficult to square Hwang’s mostly unglamorous life here with the portrait of him that has emerged over the past few months. By all accounts he eschews the trappings of extravagant wealth. At the Tenafly Classic Diner, where the “NJ Sandwich” goes for US$6.95, the servers say he’s been known to stop by, but haven’t seen him lately. More recently he’s been chauffeuring his family around town, in between coping with one of the biggest debacles in Wall Street history.
The Tenafly Classic Diner, where the servers say Hwang’s been known to stop by. Photographer: Christopher Occhicon/Bloomberg
Credit Suisse provided the first official peek into the flameout. A 172-page autopsy, released publicly on July 29, exposed a litany of management failures at Credit Suisse. But the embattled lender also says “it seems likely that Archegos deceived CS and obfuscated the true extent of its positions, which Archegos amassed in the midst of an unprecedented global pandemic.”
This account also hints at a shift in Hwang’s strategy that has baffled outsiders. Archegos had grown rapidly by making huge bets on established FAANG stocks — blue-chip US technology companies. But by last year, it was ploughing money into risker bets like ViacomCBS and several US-listed Chinese stocks, some of which had been targeted by short-sellers.
When the banks began dumping Hwang’s portfolio, these shares tumbled. And a more recent crackdown by the Chinese government has further decimated many of Hwang’s favoured bets.
For Hwang’s family office, now comes the inevitable: liquidation. Only months ago, it boasted holdings — built on borrowed money — valued at more than US$120 billion. Today, everyone is lining up for the scraps.
The person handling the liquidation is David Pauker, the specialist who stepped in after Lehman failed during the 2008 financial crisis. More recently Pauker worked on the restructuring of Steinhoff International Holdings, the South African furniture retailer that nearly collapsed after an accounting scandal in 2017. He declined to comment on pending matters.
Across the river from Tenafly, at Hwang’s midtown Manhattan office, his landlord is suing Archegos for unpaid rent. Like building owners citywide, real-estate giant Vornado Realty Trust — run by billionaire Steven Roth — has been stung by the pandemic. It’s trying to recoup US$159,165.55 from Archegos.
Hwang’s 38th-floor offices in the building across from Carnegie Hall have mostly been emptied, and his Christian charity, the Grace and Mercy Foundation, has decamped to a cheaper 22nd floor in the same building. The foundation had more than US$600 million in assets as of 2019, according to its most recent tax filings. It had even more money in early 2021, according to a person familiar with the matter.
The size of Bill Hwang’s fortune remains uncertain. Former employees have been grousing that while they’ve been wiped out, Hwang, through private investments and other holdings away from Archegos, could still be a billionaire.
One such investment was the seed money he poured into four of Cathie Wood’s exchange-traded funds that have exploded in popularity thanks to their market-beating returns.
Banks are haggling with Hwang’s team to figure out the size of his remaining wealth and whether they can claw back any of it. Credit Suisse has said it will seek to recoup money from Archegos and its related entities and individuals. The Swiss bank also flagged in its findings that Hwang’s firm took out more than US$2 billion in excess margin from its account with the lender in the days before the collapse.
The Department of Justice has been moving ahead with a probe into the blowup. At least one line of questioning has revolved around the communication between Hwang’s top associate Andy Mills and the lenders, and whether he may have misled them in the week of the crash, according to a person interviewed by prosecutors.
“The assertion that Andy Mills or anyone at Archegos misled the banks during the week of March 22 is untrue in every respect,” a spokesman for Archegos said.
The Archegos debacle has fractured ties between Hwang and some former colleagues, who are fighting to recoup deferred compensation that was tied up with the firm. Part of their annual bonuses — which amounted to about US$50 million — was invested alongside Hwang and rocketed in value with his portfolio, people familiar with the matter said. They want Hwang to carve out cash from money he may have set aside elsewhere.
One of Archegos’s employees has put his home in Manhattan and another on Long Island up for sale, according to real-estate listings.
Despite everything, Hwang is trying to push forward. He’s investing his remaining money, and occasionally crossing the Hudson to catch dinner at a New York restaurant. He spends spare hours as he has for much of his adult life: praying, reading Christian-themed literature, and listening to recordings of the Bible. He’s recently been reading “The Screwtape Letters” by C.S. Lewis, looking for guidance to navigating the current troubles. A satirical epistolary novel, the book features the demon Screwtape writing letters of advice to his nephew, Wormwood, who is trying to win the soul of a young man.
Others are trying to move on too. Hwang has promised to throw his weight, if not his money, behind at least three funds being launched by protégés. Hwang named his firm Archegos, an ancient Greek word for leader or author, a reference to Jesus. The names of two of the new funds reflect the cataclysm at Archegos. One is Red Ember Capital and the other is AriseN Partners.
