(Bloomberg) -- Jurors at Bill Hwang’s fraud and market manipulation trial have already heard witnesses say that Archegos Capital Management lied to its Wall Street counterparties. This week they will hear from one of the main liars.
Scott Becker, Archegos’ former chief risk officer, is expected to take the stand as early as Monday as one of the prosecution’s star witnesses. He was a key Archegos contact for the banks, and the jury has been played recorded conversations in which he reassures them Hwang’s family office is fine, even as it’s collapsing.
Becker, 40, has already pleaded guilty and will testify as a cooperating witness. He’s expected to say that he was directed by Hwang and co-defendant Patrick Halligan, the family office’s chief financial officer, to lie to the banks, which ultimately lost $10 billion trading with Archegos.
Halligan brought Becker into Archegos and was his direct boss. The former CFO’s lawyer, Mary Mulligan, tore into Becker during her opening statement last Monday, calling him manipulative and “a very, very convincing liar.”
Read more: Criminal Case Against Archegos’s Bill Hwang Explained: QuickTake
Becker’s testimony promises to give jurors a close look at what prosecutors claim was a sophisticated conspiracy to defraud banks and manipulate markets. Whether the jury believes him will go a long way toward deciding whether Hwang and Halligan go to prison.
According to prosecutors, Becker was part of a “corrupt core” at Archegos — a group that also included Hwang, Halligan and former head trader William Tomita. Tomita, who’s also pleaded guilty, is the prosecution’s other star witness.
Testimony from within his inner circle proved devastating last year to FTX co-founder Sam Bankman-Fried, who was swiftly convicted of stealing billions of dollars from customers of his cryptocurrency exchange.
“Jurors want to hear the inside story of what happened, rather than have to piece together emails or recorded conversations,” said Kevin O’Brien, a former federal prosecutor who now practices as a defense lawyer. He said cooperators who have accepted responsibility and pleaded guilty, like Becker, often appear especially credible to the jury.
Like others in the inner circle at Archegos, Becker first joined Tiger Asia Management, Hwang’s previous hedge fund. A summa cum laude accounting and finance graduate of Manhattan College, Becker got hired through Halligan, a fellow alum.
Starting as an operations assistant at Tiger Asia in 2007, Becker later made the move to Archegos. Hwang launched his family office in 2013 after Tiger Asia pleaded guilty in an insider trading probe and he agreed not to handle outside money.
Faced with cooperators, defense lawyers often try to depict them as scapegoating others for their own misconduct. Mulligan did exactly that in her opening statement last week, saying Becker “acted like a young child who gets caught misbehaving and wants to blame someone else.”
Jurors have certainly heard about a lot of misbehavior by Becker. Former UBS Group AG risk manager Bryan Fairbanks testified about a March 10, 2021, call in which Becker said Archegos could completely liquidate in 30 days if necessary. Fairbanks said Becker also reassured him that Archegos’ largest position was with UBS and that its portfolio there was unique.
‘No Liquidity Issues’
“Our fear always was that Archegos had the same book with other banks on Wall Street,” Fairbanks said on the stand.
That turned out to be very much the case, and catastrophe ensued by the end of March 2021, when missed margin calls led the banks to liquidate Archegos’ positions all at the same time.
Jennifer Miranda, a Jefferies Financial Group managing director in that firm’s risk management group, testified that Becker similarly reassured her in March 2021 that Archegos had billions of dollars in unencumbered cash and could liquidate its positions within a month if necessary.
When Miranda heard that Archegos was trying to withdraw excess cash from its trading account, she said she called Becker. He told her “they were not in distress and they had no liquidity issues,” she testified.
Based on that call, Miranda said she partially approved Archegos’ request, letting the family office withdraw $240 million. Two days later Archegos was insolvent, costing Jefferies $40 million.
Guilty Plea
Becker’s name is likely to come up in additional testimony from counterparty witnesses. Banks that lost money trading with Archegos include Credit Suisse Group AG, Morgan Stanley and Nomura Holdings Inc. Credit Suisse’s $5.5 billion loss was cited as a major factor in the bank’s collapse last year.
In his April 2022 guilty plea, Becker admitted that he lied to other financial institutions about Archegos’ holdings as part of a scheme to get them to extend credit or take part in swap transactions.
“For example, in 2021, I falsely represented to certain financial institutions that Archegos’s largest position was approximately 35% of its net asset value when, in fact, I knew the largest position had grown to significantly higher — to a significantly higher percentage than that,” Becker said at the time.
Prosecutors contend that these lies were at Hwang and Halligan’s behest, but the defense can be expected to argue that Becker is still lying.
‘Personal Vendetta’
Evidence of personal rivalries and frictions within Archegos could also complicate the government’s depiction of a tight “core” at the firm. Jesse Martz, a former junior member of the four-person Archegos operations team, testified last week that Becker didn’t really get along with Halligan.
“He sometimes would just vent about, you know, the stuff that, you know, Patrick is asking him to do or just sometimes vent about the personal vendetta with Pat,” Martz said on the stand.
US District Judge Alvin Hellerstein pressed Martz on what he meant by “vendetta,” and the witness responded that Becker often complained about Halligan’s personal traits.
“He didn’t like his boss?” the judge asked.
“Yeah, that’s kind of the sense that I was getting,” Martz said.
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