Bill Hwang, the billionaire behind Archegos, whose collapse was described as a “national calamity” by a federal prosecutor, will be doing hard time after all. 

Brushing aside the “utterly ridiculous” suggestion from Hwang’s defense team that he serve no prison time, US District Judge Alvin Hellerstein sentenced Hwang to 18 years in prison for fraud and market manipulation on Wednesday.

On a Scale of Bankman-Fried

Hwang’s sentencing bookends a dramatic saga that began with the shock implosion of his firm that cost Wall Street billions. Mentored by the late hedge-fund billionaire and Tiger Management founder Julian Robertson, Hwang launched Archegos as a New York-based family office in 2013, despite his previous hedge fund shutting down a year earlier after the firm pleaded guilty to wire fraud.

Prosecutors said Hwang lied to banks about Archegos’ portfolio — it managed $36 billion at its peak — to borrow money for risky wagers on stocks, especially in the media and tech sectors. The bubble burst in March 2021 when the price of some of his biggest bets dropped and he couldn’t meet margin calls. Archegos was wiped out in less than a week. Banks were left on the hook for $10 billion. While most counterparties recovered, Archegos’ legacy includes possible precedent for harsher white collar sentences and a Swiss banking giant in ruins:

• US Attorneys sought a 21-year-sentence for Hwang, unusually long for a Wall Street crime. “The amount of losses that were caused by your conduct are larger than any amount of losses I’ve dealt with as a judge,” Hellerstein said, at one point comparing Hwang to crypto-fraudster Sam Bankman-Fried, who was sentenced to 25 years in prison.
• The most infamous collateral damage from Archegos’ failure was Credit Suisse, which booked $5.5 billion in losses related to its prime brokerage services to Archegos and collapsed in March 2023. Swiss rival UBS bought the bank, as Hwang’s misdeeds literally reconfigured one of the world’s most important financial centers.

Sensing a losing position, a lawyer for Hwang’s lawyer at one point tried to get Hellerstein to consider a four- to five-year sentence, invoking his charitable deeds and his modest lifestyle in New Jersey. The judge didn’t buy the humble living claim, noting Hwang’s “new apartment in Hudson Yards,” a pricey development in midtown Manhattan.

The Hurting: “I feel deep pain for all of Archegos’ employees, the banks and all the employees at the banks who suffered,” Hwang told the court. “I am grateful to God for so many blessings I’ve had in my life.”

Defense is the best offense for startups.

Military tech startups are seeing a big boost in their valuations of late, spurred in part by former President Trump’s re-election and Russia’s war in Ukraine. Palantir, a frequent contractor for US Immigration and Customs Enforcement, has now surpassed Lockheed Martin in market cap. Defense startup Anduril is also well-positioned to benefit from the incoming administration, and it’s not just US startups making hay.

All’s Fair

Palantir saw its share price shoot up 50% after the US election result. The company was co-founded by Peter Thiel, the conservative Silicon Valley mega-investor; and while his relationship with Trump has gone through some peaks and troughs, Thiel appeared to warm to Trump’s second bid after he chose JD Vance as his running-mate. Investors are betting that Palantir will be in line for even more government contracts come January, according to a Financial Times report. The same holds true for Anduril which is headed up by Palmer Luckey, the man who sold his VR Oculus to Meta for $2 billion and is a staunch supporter of Trump.

Non-Trump-adjacent defense startups are also getting boosts. On Wednesday, The Wall Street Journal reported a little-known Utah-based drone supplier called Teal Drones bagged itself a contract with the US military, and investments in defense tech are ticking up across the Atlantic:

• Investment management firm VanEck’s defense ETF is up over 46% year-to-date, outperforming both the S&P 500 (up 24%) and the Nasdaq (41%).
• Portuguese drone startup Tekever netted a €70 million ($74 million) cash injection from backers including NATO’s VC fund on Wednesday. While European VC tech funding overall has been falling over the past couple of years, funding for defense tech firms specifically has grown.

Cold War Re-Run: Ukraine fired US missiles into Russia for the first time earlier this week, and Putin’s resulting displeasure gave global markets a bit of a shake. The US and many European nations shut their embassies in Kyiv on Wednesday, citing the threat of a significant aerial attack from Russia.

Mr. Mouse has come a long way in his nautical career since Steamboat Willie.

Disney’s newest cruise ship, the Disney Treasure, is due to make its maiden voyage next month. The departure marks a continued drive within Disney to supercharge its cruise business: The House of Mouse hopes to double the size of its leisure fleet by 2031 in an “unprecedented period of growth,” Thomas Mazloum, president of Disney’s new experiences portfolio and Disney signature experiences, told CNBC.

Cabin Fever

Last year, with Disney boomerang CEO Bob Iger back at the wheel, the company signaled plans to pour $60 billion into its parks and cruises over the following 10 years via an SEC filing. At the moment, Disney’s Experiences division isn’t growing at a particularly fast clip, but the company might be hoping that an expanded cruise division somehow bypasses the consumer reluctance that has weighed down visits to its parks.

Speaking to CNBC, Mazloum was very upbeat about the cruise division:

• “The demand that we’re seeing right now for Disney Cruise Line is very strong,” said Mazloum. “We’re a premium brand, occupancy is high, and frankly, the business is doing really, really well,” he added.
• Shares in cruise line companies have been faring pretty well so far this year, so Mazloum’s optimism isn’t fueled purely by Disney magic.

Sea Dogs: The cruise industry is apparently looking to expand its customer base while it’s got momentum — even trying to reel in non-human passengers. Margaritaville at Sea is due to launch its first dog-friendly cruise next year. A bunch of dogs running around a boat? Sounds like a Disney movie in the making.