Reported by David Voreacos to Bloomberg.
Tiger Asia Management LLC, the New York-based hedge fund run by Bill Hwang, pleaded guilty to a wire fraud charge and will forfeit $16.3 million in a U.S. insider-trading case.
Hwang entered the plea today in federal court in Newark,New Jersey , admitting Tiger Asia agreed to be “brought over the wall” in a scheme to get material, nonpublic information about Bank of China Ltd. shares in December 2008 and January 2009.
Former Tiger Asia Management LLC hedge fund manager Bill Hwang leaves the federal court house in Newark, New Jersey, Wednesday, December 12, 2012, after pleading guilty to wire fraud on behalf on the company. Photographer: Emile Wamsteker/Bloomberg News
“It appears that the gist of the scheme was to use that nonpublic information in order to sell shares in short sales,”U.S. District Judge Stanley Chesler said at the plea hearing. Chesler placed Tiger Asia on probation for one year, and said the $16.3 million represents the total illicit gain.
“Tiger Asia regrets the actions for which it accepts responsibility today and is grateful that this matter is now resolved and behind it in the U.S.,” Hwang said in a statement.
The plea was “negotiated at length,” Tiger Asia attorney Lawrence Lustberg told Chesler, saying the entire amount was paid today. “It reflects a just resolution of this matter.”
Tiger Asia will separately resolve a U.S. Securities and Exchange Commission lawsuit, Lustberg said in an interview, adding that all investor capital has been returned.
In August, the hedge fund said it was returning outside capital to investors amid a three-year probe by Hong Kong regulators. The fund, founded in January 2001, had produced annual returns averaging 16 percent since inception.
Hong Kong’s Securities and Futures Commission alleged the hedge fund traded on inside information from bankers arranging placements of China Construction Bank Corp. and Bank of China Ltd. shares in 2008 and 2009, pocketing HK$38.5 million ($5 million). Tiger Asia, which has no employees and physical presence in Hong Kong, denied the allegations in an Oct. 12, 2010, letter to investors.
The firm told clients later that month that it had received a subpoena from the U.S. Securities and Exchange Commission following the allegations by the Hong Kong regulator.
In the early 1990s, he was an institutional stock salesman at Hyundai Securities Co., where he dealt with Julian Robertson ’s Tiger Management LLC.
Robertson, a pioneer and mentor in the hedge-fund industry, hired him in 1995 after Hwang won an annual prize awarded to the person outside of Tiger who had contributed most to the fund’s success.
Robertson built Tiger Management into one of the world’s largest hedge funds by generating average annual returns of 32 percent, lifting his assets under management to $22 billion by mid-1998. After customer defections and losses cut Tiger’s assets to $6 billion two years later, Robertson decided to return money to clients and employ Tiger Management to invest his own fortune in hedge-fund managers, taking a share of profits in exchange.
Tiger Management has employed at least 40 portfolio managers and analysts who subsequently formed their own firms and became known as Tiger cubs. Those he seeded after 2000 with his own capital are known as “grand cubs.”