May 8 (Reuters) - The trial of former Archegos Capital

Management head Sung Kook "Bill" Hwang and his deputy Patrick

Halligan opens on Wednesday over their role in the failure of

the investment firm, which collapsed in a span of days in 2021,

causing billions of dollars in losses at global banks.

Hwang and Halligan pleaded not guilty.

WHAT ARE THEY ACCUSED OF DOING?

Authorities allege Hwang and Halligan lied to banks in order

to maximize Archegos' borrowing so the firm could manipulate

prices of its stockholdings, which included ViacomCBS, which is

now Paramount Global ( PARAA ), and Discovery, now part of Warner

Bros Discovery ( WBD ).

Prosecutors accused Archegos of using the borrowed money to

buy swaps, which further increased the firm's economic exposure

to the stocks. When prices for the shares began to fall, the

banks demanded repayment on the loans, which Archegos was unable

to do. The underlying stocks were sold by the banks, causing a

market rout.

Prosecutors say the sell-off wiped out more than $100

billion in shareholder value at the companies that Archegos bet

on and billions of dollars of losses at the banks that loaned it

money.

WHAT ARE THE SPECIFIC CHARGES?

Hwang faces charges of racketeering, securities fraud and

wire fraud along with seven counts of market manipulation.

Halligan is charged with racketeering, wire fraud and securities

fraud.

Each charge carries a potential 20-year sentence.

WHAT DO RACKETEERING AND MARKET MANIPULATION INVOLVE?

The Department of Justice said Hwang and Halligan committed

a racketeering conspiracy in which they set up an illegal scheme

for profit.

The market manipulation charges against Hwang allege that he

engaged in or directed transactions in securities and

securities-based swaps to raise or lower their prices and induce

others to purchase those securities.

WHAT DO THE FRAUD CHARGES ENTAIL?

Prosecutors allege the Archegos founder engaged in a

securities fraud scheme to build positions in stocks and

manipulate their prices.

Hwang and Halligan were both charged with securities fraud

of counterparties. Prosecutors contend they lied to multiple

banks about Archegos' assets to obtain more loans that funded

ever larger positions and kept the securities' prices inflated.

The two men were also charged with wire fraud of

counterparties. Wire fraud refers to fraud involving online and

telecommunications networks.

Prosecutors claim they made false and misleading statements

through these means to defraud Archegos' trading counterparties.

HOW MIGHT HWANG AND HALLIGAN DEFEND THE CHARGES?

Hwang and Halligan are expected to argue that prosecutors are

pushing a novel and nonsensical market manipulation theory.

Lawyers told Reuters that prosecutors were pushing the legal

boundaries in their market manipulation case.

Typically, market manipulation involves some kind of

trickery, and the defense legal teams may assert that the stock

purchases Archegos made in the open market did not involve

deception.