Bill Hwang — Tiger Asia
Tiger Asia was once one of Asia’s most promising hedge funds. Bill Hwang founded Tiger Asia, which is based in New York, in 2001 after working for Julian Robertson at Tiger Management. Using a traditional long/short strategy of the Tiger Cubs, Bill Hwang at one point controlled $3 billion in outside capital. However, at the end of 2012 Tiger Asia decided to return outside capital to investors, after what it described as a “prolonged legal situation.”
Last updated: 02/19/2020
The situation in question was a three-year insider trading investigation by the Hong Kong authorities into allegations of trading improprieties at the hedge fund. Bill Hwang had admitted using insider information to trade stocks of Bank of China Ltd. and China Construction Bank Corp. in December 2008 and January 2009, and manipulating the share price of China Construction Bank in January 2009.
SEC and SFC
The U.S. Securities and Exchange Commission (SEC) began its own investigation in October 2010. Not until December 2013 was the Tiger Asia case finally settled in both Hong Kong and the United States. Tiger Asia pleaded guilty and agreed to pay settlements for illicit gains and law enforcement penalties issued by the SFC and SEC.
The SFC sought to freeze Tiger Asia’s assets in 2009, alleging the hedge fund traded on insider information from bankers arranging placement Bank of China and China Construction Bank that year. But the SFC’s action was challenged by Tiger Asia, which argued the regulator had no jurisdiction to freeze its assets in the city without a pre-existing criminal conviction for market misconduct or similar finding from a civil tribunal.
In December of 2013, a Hong Kong court ordered Tiger Asia Management to pay US$5.8 million to some 1,800 local and overseas investors affected by their insider trading involving two Hong Kong-listed banks. Fines paid to the SEC totaled $60.3 million in U.S. criminal and civil settlements.
Bill Hwang and Tiger Asia have been banned from trading in Hong Kong.
Since inception Tiger Asia returned around 15% per annum for clients, handily beating all benchmarks. Tiger Asia has changed the company name to Archegos Capital Management LLC and no longer manages outside capital.
Commenting on Tiger Asia’s downfall, Julian Robertson said:
“I am saddened by the news but certainly understand Bill’s decision…I have worked side-by-side with Bill for 20 years. He has always been a great partner, a great person and a great friend. I have enormous respect for him as an individual and an investor. I continue to hold him in the highest regard.”
Tiger Asia’s downfall was brought about by the fund’s use of insider information to trade stocks of Bank of China Ltd. and China Construction Bank Corp. in December 2008 and January 2009. According to court documents, Tiger Asia received advance information on UBS AG’s sale of 3.4 billion Hong Kong-listed shares of Bank of China Ltd. in December 2008 after agreeing not to trade on the knowledge. Tiger Asia was given confidential information and signed a “wall-crossing” agreement not to trade on this information.
Despite the agreement, Tiger Asia sold short BOC shares before the two placements were announced to the public and made a notional profit of HK$8.6 million (US$1.1 million). Further, Tiger Asia acted on similar information regarding a Bank of America Corp. sale of China Construction Bank Corp. shares in January 2009. Tiger Asia was entrusted with confidential information in a private placement offering of CCB shares. Then, under the direction of Bill Hwang, Tiger Asia immediately sold short CCB shares ahead of the public announcement and covered its position with shares obtained from the placement at a discount, making a notional profit of HK$29.9 million (US$3.8 million). During this process, Tiger Asia was alleged to have manipulated the CCB share price to the downside to increase its returns.
Stock Manipulation and Fraud
“Starting with the issuance of a subpoena to Tiger Asia in October 2010, the U.S. SEC finally settled the case in December 2012 when Tiger Asia pleaded guilty. Apart from short selling Chinese bank stocks based on confidential information received in private placement offerings, Tiger Asia also manipulated stock prices and fraudulently collected management fees. According to the SEC, on at least four occasions, Hwang, with Park’s assistance, attempted to manipulate the month-end closing prices of publicly traded Chinese bank stocks in which Hwang’s hedge funds had substantial short positions. Hwang directed Park to place losing trades in an attempt to lower the price of the stocks and increase the value of the short positions. This tactic enabled Hwang and Tiger Asia to inflate the calculation of the management fees by approximately $496,000 .
Proceedings and Settlement
On Dec. 12, 2012, the U.S. SEC and the U.S. Attorney’s Office for the District of New Jersey announced that proceedings had been initiated against Tiger Asia in which Tiger Asia pleaded guilty to criminal offenses under U.S. law. The SEC charged Hwang and Park with civil offenses. The SEC lawsuit required Hwang, Tiger Asia Management and Tiger Asia Partners to collectively pay a settlement of US$19 million in disgorgement and prejudgment interest, including US$16.3 million that Tiger Asia will pay directly to criminal authorities and US$44 million in penalty. In criminal court, Tiger Asia was placed on probation for one year. However, with the exception of Tiger Asia Management, the defendants (Hwang, Park and other Tiger Asia partners) neither admitted nor denied the charges.
Compared to the U.S. progress, it was another year before Hong Kong’s regulatory bodies settled the Tiger Asia case. Following the ruling of the CFA, the SFC commenced a Market Misconduct Tribunal against Tiger Asia in July 2013. Because U.S. proceedings with Tiger Asia are classified as criminal, the SFC sought civil orders on the basis of double jeopardy (a legal principle that protects a person from being criminally prosecuted twice for the same conduct).
In December 2013, Tiger Asia and the two senior officers admitted to insider dealing. The SFC exonerated William Tomita, one of the defendants in previous proceedings, as a junior member of staff unknowingly involved in insider dealing and manipulation. However, both Tiger Asia and two of its senior officers, Bill Sung Kook Hwang and Raymond Park, were ordered to pay HK$45.3 million (US$5.8 million) to some 1,800 investors who were affected by insider dealing involving two Hong Kong-listed banking stocks.
Tiger Asia and Monetary Compensation
Apart from monetary compensation, the SFC has also sought a cease and desist order and an order prohibiting Tiger Asia parties from dealing in Hong Kong without leave of the court for up to five years. In May 2014, the SFC recommended to the MMT that Bill Hwang and Raymond Park be banned from dealing in Hong Kong for as long as five years. The regulator believes the potential still exists for market misconduct. The ban, know as a cold shoulder order, is intended to protect the investing public.” — Source: Cross-border Securities Enforcement: The Case of Tiger Asia Management LLC
Since its 2001 inception, Tiger Asia returned around 15.8% per annum for investors. However, at the end of 2007, Tiger Asia had produced returns of around 40.4% per annum for investors. By the end of 2007 Tiger Asia’s assets under management reached a record $8 billion. Unfortunately, during the years following the 2008/2009 crisis, Bill Hwang made a number of mistakes that eroded returns.
During 2008 Hwang finished down 23%, although he had been up as late as August of 2008. Tiger Asia had been heavily short the market during the first half of 2008 but went net long by 50% during the fourth quarter, turning bullish too soon. Bets on Lehman and Volkswagen also hit the fund hard. Following 2008’s mistakes, Hwang went net short during 2009 when markets around the world rallied. Tiger Asia ended the year up only 3%. During 2010 the fund returned 1% and rallied by 9% during 2011.
Tiger Asia: Articles
- Tiger Asia Ordered to Pay Investors $5.8 Million
- Familiar Tale As High-Flying Bill Hwang’s Tiger Asia Closes
- Amid Insider Trading Inquiry, Tiger Asia Calls It Quits
- Tiger Asia, Hwang Banned From Trading in Hong Kong for 4 Years
- David Voreacos, “Tiger Asia Admits Guilt in $60 Million Court Settlement”.Bloomberg.
- Gillian Wee , “Tiger Asia Receives SEC Subpoena After Hong Kong Probe”.Bloomberg.
- All Hong Kong Securities and Futures Commission allegations and actions are obtained from the news releases disseminated by SFC on their website
- Thomas O. Gorman, David Richardson and Eden McMahon. “How to trap a tiger – regulators’ nets tighten around Tiger Asia on both sides of the Pacific”. August 21, 2013
- Herbert Smith Freehills Dispute Resolution. “Tiger Asia Management loses final jurisdictional challenge: Hong Kong’s highest court confirms court’s free-standing power to grant orders over contraventions of the Securities and Futures Ordinance under Section 213”. 16 May 2013
- SFC Enforcement News. 10 May 2013
- U.S. Securities and Exchange Commission press release. Washington, D.C., Dec. 12, 2012.
- Azam Ahmed. “Amid Insider Trading Inquiry, Tiger Asia Calls It Quits.” The New York Times. August 14, 2012, 12:50 PM
- Yung, Chester. “Tiger Asia Ordered to Pay Investors $5.8 Million”. The Wall Street Journal. Dec 21, 2013
- SEC Orders. In the matter of Sung Kook Hwang
- In matter of Raymond Y.H. Park
- Network of Korean-American Leaders