Bill Hwang has suffered another major blow in his sad fall from grace.
In late December, a Hong Kong court ordered Hwang, Tiger Asia Management — the hedge fund firm he founded — and one of its officers to pay $5.8 million stemming from charges that the Tiger Cub engaged in illegal insider trading, according to the New York Times.
The hedge fund has admitted it used inside information on two different occasions in late 2008 and early 2009 to trade the shares of two Chinese banks, according to the report. Tiger Asia had been battling with Hong Kong securities regulators since 2009. These and charges from regulators in other countries forced Hwang to shut his firm in late 2012.
In December 2012, Hwang agreed, along with his firm, to pay $44 million to settle charges of engaging in two trading schemes involving Chinese bank stocks. Altogether they were accused of making $16.7 million in illegal profits.
The regulator alleged that Hwang and his firm sold short three Chinese bank stocks based on confidential information they received in private placement offerings and covered their shorts with private placement shares bought at below-market prices. In a separate scheme, the Securities and Exchange Commission accused Hwang and his firm of trying to manipulate the prices of Chinese bank stocks with the ultimate goal of collecting higher management fees from investors. At the same time, the U.S. Justice Department criminally charged Tiger Asia Management but stressed it would not charge Hwang or any other employees.
In a separate case about the same time, Japan’s securities regulator fined Hwang’s fund, Tiger Asia Partners, $816,500 for allegedly manipulating the trading of shares of Yahoo Japan Corp., the country’s highest penalty in a market manipulation case at the time. It did not bring any insider trading charges, however.
Hwang’s initial success was a classic rags-to-riches immigrant story. Six years after landing in the U.S., Hwang, who preferred to go by his adopted American name rather than his Korean name, Sung-Kook, graduated from the University of California, Los Angeles, and then received his MBA from Carnegie Mellon University.
In 1992, Hwang’s success was set in motion when South Korea opened its market to foreign investors. While a broker with Hyundai Securities, Hwang met an analyst with legendary hedge fund firm Tiger Management Corp. and eventually struck up a relationship with its founder, Julian Robertson Jr., who later hired Hwang to help navigate the South Korean market, which Robertson thought was undervalued. After Tiger was shuttered, Hwang’s became one of the first incubator funds to be seeded by Robertson, in 2001.
Through 2007, Tiger Asia racked up a compounded annualized return of about 40 percent. At the end of 2007, Hwang had about $8 billion under management. He and Charles (Chase) Coleman III, co-founder of the Tiger Global Management long-short equity hedge fund firm, were held up as shining examples of the huge success of Robertson’s seeding strategy, created at the beginning of the decade, to dole out start-up capital to some of his more promising employees to launch their own hedge funds.
As the shaky financial markets started to crumble in 2008 amid concerns over subprime mortgages, Tiger Asia was actually in the black as late as August of that year. But Hwang was bullish for the rest of the year, and it cost him: He finished the year down 23 percent.
Hwang never recovered, both performance-wise and personally. Now he is one of the biggest embarrassments of the huge group of mostly successful Tiger scions.
