Legendary trader Bill Huang made 15 billion US dollars from 200 million, but his account was liquidated overnight
He started from scratch, earned $15 billion in 20 years, and lost it all in just one day. As the protagonist of this century's big liquidation, he personally demonstrated to global investors what life is like a dream.
This is Bill Huang, the world's biggest loser who created a single-day liquidation of $15 billion in 2021. This also set a record for the largest single-day loss in human history. No one cared about making money for 20 years, but once the loss was known to the world. As a risk gambler, he manipulated $160 billion through high leverage. In the end, not only did he lose his tens of billions of dollars, he also owed a large amount of debt and caused heavy losses to financial institutions, mainly Nomura and UBS.
Bill Huang was born in 1964 into a poor family in South Korea. In 1982, he left Korea with his family and came to the United States. After his father passed away, his mother worked three jobs every day to support the entire family, and the experience of being hungry three times in nine meals made Bill Huang vow that when he grew up, he would earn a lot of money and not let himself or his family go hungry again. After graduating from UCLA, Bill Huang entered a fund company on Wall Street as a salesperson and worked there for 8 years. As an ambitious young immigrant in the U.S., Bill Huang had a strong desire for success.
In 1996, Bill Huang met Robertson of Tiger Fund, who changed his life. Robertson turned the Tiger Fund from 8.8 million dollars to 23 billion dollars over 18 years, growing more than 2,600 times. 1996 happened to be the peak period of Tiger Fund, and Bill Huang joined Tiger Fund at that time. In 1998, the inflated Robertson began to make consecutive mistakes, and by 2000, the Tiger Fund had shrunk from its peak of 23 billion dollars to 1.5 billion dollars, ultimately being forced to liquidate.
Unwilling to accept defeat, Robertson decided to launch a cub program, sharing his wealth and resources with more than 60 traders he favored. Bill Huang was one of them, receiving an initial funding of 23 million dollars. In 2001, with the 23 million dollars of startup capital provided by Robertson, Bill Huang founded Tiger Asia Fund and began his comeback journey on Wall Street. Bill Huang did not disappoint Robertson's expectations; starting from 2001, in just six years, the average annual return of the Tiger Asia Fund established by Bill Huang exceeded 40%, and by the end of 2007, its scale had reached 8 billion dollars. Bill Huang became the brightest star among many of Robertson's tiger cubs.
In the years of skyrocketing wealth, Bill Huang has lost his sense of risk, just like his mentor Robertson, who fell from his peak in 1998. In the first half of 2008, Bill Huang made a fortune by shorting the stock market, but his confidence led him to start buying the dip in the second half, only to find that the bottom was not reached and there was still a basement below, resulting in Tiger Asia losing 23% for the year. In the following time, Bill Huang began to make repeated mistakes. By 2012, the scale of Tiger Asia Fund had shrunk to only 1.2 billion dollars. At the end of that year, Bill Huang closed Tiger Asia Fund. After closing the fund, Bill Huang did not completely withdraw from the industry; instead, he took the 200 million dollars he earned over the years to start his own private fund. He named his fund the Leader Fund.
Bill Huang thus began the second journey of his career. After establishing his private fund, he became bolder because he was using his own money. As a fund with only 200 million dollars, it was hardly significant on Wall Street. He firmly believed that the dream of becoming a billionaire would not stop due to thin profits; to quickly realize this goal, he had to leverage.
After going solo, Bill Huang's performance was also quite good, earning 100 million dollars in the first year. When he attended an annual meeting of Wall Street fund company big shots, he thought this achievement would at least rank him in the middle, but unexpectedly, during the annual meeting, a stand-up comedy host pointed at Bill Huang without any regard and said, 'This is the poorest person here.' This deeply hurt Bill Huang's heart; the feeling of being publicly humiliated was unforgettable for him. He secretly vowed that he would never allow such a situation to happen again in his life, and he wanted to earn a lot of money.
Since then, Bill Huang's investment style underwent a huge change; he wanted to make quick money, gradually shifting from aggressive to even more aggressive. So he contacted several major investment banks on Wall Street, hoping to increase leverage to amplify profits. Nomura Securities was the first to start collaborating with Bill Huang. Soon, Bill Huang became one of Nomura's top ten clients and subsequently obtained huge financing from Credit Suisse. After slightly examining Bill Huang's investment performance in recent years, several Wall Street investment banks were also willing to lend him money, thus earning considerable service fees.
Under the support of leverage, Bill Huang's wins and losses were magnified several times, with daily fluctuations in amounts reaching tens of millions to over a billion dollars. In just a few short years, with an extraordinary vision and remarkable talent, the Amazon and Netflix that Bill Huang bought at low prices rose countless times. Based on a strong investment style and using high leverage, Bill Huang turned 200 million dollars into 15 billion dollars in seven years, making his fund's performance one of the top in Wall Street. With his strength and ferocity, Bill Huang became the new king of Wall Street. After gaining money and honor, Bill Huang did not stop; he wanted to do even bigger things and make money faster until he became the biggest one. Reaching the peak of life also meant that there was a bottomless abyss beneath him, and the gates of hell were slowly opening for him.
The leverage used by Bill Huang is a financial instrument called a total return swap, which simply means that Bill Huang invests a portion of capital and lets the bank help him buy stocks worth five times the principal—similar to the leverage principle in cryptocurrency today. After buying, Bill Huang and the bank settle daily. If the stock price rises, the bank gives the profits to Bill Huang; if the stock price falls, Bill Huang bears the losses. Regardless of whether Bill Huang makes or loses money, he must ensure the bank's principal and interest; regardless of stock fluctuations, he must pay interest to the bank. The bank is also happy to provide Bill Huang with more capital, as it can earn more interest without directly holding stocks. This allows Bill Huang to avoid publicly disclosing his investments, thereby achieving the goal of hiding his positions.
This operation generally has no issues, but if the market reverses, everyone might end up losing everything. According to information disclosed by the U.S. SEC, Bill Huang usually first buys shares of a target listed company, and when he approaches 50%, he continues to buy through total return swaps to avoid public disclosure requirements. After Bill Huang acquires 10% to 15% of the target listed company using this method, he manipulates the stock price. For example, during the period from December 2020 to March 2021, the Chinese concept stocks that Bill Huang heavily bought had an average daily trading volume reaching 15% of the total trading volume, with 11 trading days seeing volumes exceeding 30%, and on 8 trading days, the volume of Tencent Music purchased accounted for 35% of that day's trading volume, making Chinese concept stocks one of the best-performing sectors in the entire U.S. stock market during that time.
Because Bill Huang's fund was established abroad and did not publicly raise funds, the regulatory environment was relatively relaxed. He also utilized complex financial tools like total return swaps to distribute his positions across several banks, allowing Bill Huang to manipulate stock prices without directly holding shares. The stocks he manipulated included Viacom, the third-largest media company in the U.S., as well as Chinese concept stocks like iQIYI, Tencent Music, VIP.com, Baidu, and Wujin Technology. Before the crash, the stock price of Viacom, which Bill Huang heavily invested in, rose from 12 dollars to nearly 100 dollars, largely due to Bill Huang's influence. When asked whether Viacom's strong performance was a sign of strength, Bill Huang calmly replied, 'No, this is a sign that I bought it.'
Several Chinese concept stocks also rose by over 50%. After applying 10 times leverage, Bill Huang's returns doubled. In March 2020, Bill Huang used 1.5 billion dollars of principal to purchase about 10 billion dollars worth of stocks with 7 times leverage. By March 2021, Bill Huang's holdings had already gained enormous profits. In just one year, Bill Huang increased his investment portfolio from 1.5 billion dollars to 35 billion dollars. Subsequently, Bill Huang continued to increase his holdings of the 35 billion dollars' worth of stocks and added another 5 times leverage, purchasing over 160 billion dollars worth of stocks, equivalent to about 1 trillion RMB. By utilizing high leverage, Bill Huang leveraged a significant amount of capital from Wall Street financial institutions, and such scale was comparable to the world's largest hedge fund, Bridgewater Associates. At this time, Bridgewater Associates' management scale was only 178 billion dollars, and the dream of becoming the largest hedge fund in the world was now within reach, which excited Bill Huang immensely.
Just as Bill Huang was about to welcome his life's highlight moment, the wheel of fate began to turn backward. Subsequently, Viacom, in which Bill Huang had heavily invested, suddenly announced a stock issuance, causing the stock price to plummet. If it were just one stock's drop, it could be manageable, but misfortunes do not come singly; various unexpected events erupted in a short period, opening the curtain for Bill Huang's bankruptcy. On March 24, the U.S. passed the Foreign Companies Accountability Act, causing Chinese concept stocks in the U.S. stock market to drop again. Coincidentally, Chinese concept stocks were also a heavily invested sector for Bill Huang, and this large drop began to trigger a chain reaction. If Bill Huang could not find funds to cover his positions, he would only face bankruptcy.
On March 26, Bill Huang's fund could no longer hold on, and after three consecutive days of crashing declines, Bill Huang lost all of his 15 billion dollars. After working so hard for so many years and earning over 10 billion dollars, under the violent crash with high leverage, everything turned to dust overnight, leaving him in debt to Credit Suisse and Nomura for tens of billions of dollars. Bill Huang went from starting from scratch to making 200 million dollars over more than 10 years, then to 15 billion dollars in 7 years, and from 15 billion dollars to massive debt, he only took one day. From having nothing to being a capital giant on Wall Street was supposed to be an inspiring story, but this heavy investment and aggressive strategy only led to total loss. Because of his greed, Bill Huang lost everything overnight and was burdened with enormous debts, which is quite lamentable.
The legend continues, as cryptocurrency provides a near-zero-cost threshold, attracting many hopefuls wanting to become like Bill Huang to rush through that door. Behind the door lies gold or traps? The story continues to unfold, money will never sleep, and the rooftop will keep flowing. Next week, we will share the story of another rooftop player.
Why does cryptocurrency reek of money?
