US federal prosecutors have charged the owner of Archegos Capital Management Bill Hwang with racketeering and fraud.
Regulators said his manipulation of stock prices cost banks billions of dollars when his "house of cards" collapsed, documents released on Wednesday said.
Archegos, a family office run by former Tiger Asia manager Mr Hwang, defaulted on margin calls in March 2021, leaving big-name banks nursing heavy losses and sparking a fire-sale of shares including ViacomCBS and Discovery Inc.
It cost global banks including Credit Suisse, Nomura Holdings, Morgan Stanley and Deutsche Bank more than $10 billion in losses.
Prosecutors allege that Mr Hwang, who denies wrongdoing, manipulated the stock price of seven of Archegos's portfolio companies, including Viacom, Discovery and Tencent Music Entertainment, according to an indictment brought by the US Attorney's office in Manhattan.
A lawyer for Mr Hwang said in a statement the case had "absolutely no factual or legal basis".
Prosecutors say Mr Hwang deliberately misled counterparties over the positions Archegos held and controlled the timing and size of trades to have a greater effect on price, the indictment said.
The US Securities and Exchange Commission separately brought a complaint.
"Archegos engaged in a brazen scheme to manipulate the market," the SEC said. "Eventually, the weight of defendants’ fraudulent and manipulative scheme was too much for Archegos to bear, and over the course of less than a week in late March 2021, the house of cards collapsed."
Prosecutors said Mr Hwang and former chief financial officer Patrick Halligan "corrupted the operations and activities" of the family office to manipulate the price of stocks it held and lied to banks and brokers, which lost billions on trades.
The SEC said it had sued Mr Hwang, Mr Halligan, head trader William Tomita and chief risk officer Scott Becker for their alleged roles in the scheme.
Mr Hwang's lawyer Lawrence S. Lustberg was innocent and had fully co-operated with the government.
"As you will see when the facts unfold, Bill Hwang is entirely innocent of any wrongdoing; there is no evidence whatsoever that he committed any kind of crime, let alone the overblown allegations that pervade this indictment," he said in a statement.
A lawyer for Mr Halligan said his client was "innocent and will be exonerated".
Lawyers for Mr Becker and Mr Tomita did not immediately respond to requests for comment.
SEC enforcement director Gurbir Grewal said Mr Hwang and the company "propped up a $36bn house of cards by engaging in a constant cycle of manipulative trading, lying to banks to obtain additional capacity, and then using that capacity to engage in still more manipulative trading".
Mr Hwang built up leverage by using derivatives known as total return swaps from big Wall Street banks. The trading allows investors to bet on stock price moves without owning the underlying securities. Instead, the bank buys the stocks and promises the investor a performance-related return. The client, in turn, posts collateral to secure the trades with the bank.
The swaps allowed Mr Hwang to hide his positions and evade regulatory scrutiny, the SEC said.
Family offices, such as Archegos, are private funds that manage people's wealth. Single family offices have few regulatory requirements.