I have been following the trial and I don’t understand. I think he’s guilty of 90% of what he’s being accused of and he 100% committed fraud but I don’t get the market manipulation part. He clearly manipulated the market but isn’t that the point?
Prosecutors are alleging he lied to various banks in order to get more margin and liquidity so that he could keep buying up more of the same stocks. The banks held the stocks on their balance sheets, I think. He told them he had no more than 35% concentration in any one stock which was a lie, it was closer to 80%. Banks would never have allowed that to happen if they knew that. He would have his traders buy up stock right before market close to push prices higher. He correctly assumed banks would buy up shares to hedge, which would also push prices higher. The stocks he targeted were not very liquid, Viacom CBS which is now Paramount i think, and a Chinese educational company. He owned large percentages of the total shares and would often be trading against himself. Because family offices have very little regulations, they do not have to disclose their positions unlike Hedge Funds.
So my basic understanding is that he would artificially inflate prices by buying up as many shares as possible. So that when new investors come in, they are buying his shares at elevated prices. But in a free market, isn’t the onus on the investor to determine if they are comfortable with the current price? If the investor and market thinks the current share price is overpriced, then rationally they would short the shares. But if they buy it, that would signal that they agree with and are comfortable with the current price. They also don’t have to place the trade if they think shorting is too risky or they could buy puts.
A few years ago, maybe 2019-2020, there was a guy on r/wallstreetbets who basically bought up 70% of a single strike on the call side. He got in cheap when the stock was down and was now basically setting the price when he was selling. He posted proof so it was legit I think, other people in the comments seemed to confirm but it was a few years ago and my memory could be wrong. How’s that any different than what Bill Hwang is doing here, but instead of options, he’s using stocks and swaps? Also the banks knew about his previous fraud conviction but overlooked it due to the huge fees he would generate.
The end goal of business is to gain a monopoly. The end goal of trading is to corner the market and dictate the price. So what’s he guilty of? Almost everyone plays this game, it’s just that most don’t have $35-150b cash to trade with.
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