© Reuters. FILE PHOTO: Sung Kook (Bill) Hwang, the founder and head of a private investment firm known as Archegos exits the Manhattan federal courthouse in New York City, U.S., April 27, 2022. REUTERS/Shannon
By Jonathan Stempel
NEW YORK (Reuters) – Bill Hwang is seeking the dismissal of his U.S. fraud indictment over the collapse of his once-$36 billion Archegos Capital Management LP, saying prosecutors committed misconduct by sandbagging him when building their case.
Hwang made the request in a Friday night filing in Manhattan federal court, where he has pleaded not guilty to fraud and racketeering conspiracy charges over Archegos’ March 2021 demise.
Hwang’s lawyers said Department of Justice prosecutors concealed prior to his arrest how Hwang had been their prime target, the supposed “mastermind” of a vast market manipulation scheme, and induced him to divulge his defense strategy.
“The government’s conduct cannot be accurately described as anything other than deceitful,” the lawyers said, calling the probe a “sham.”
Archegos imploded when it failed to meet margin calls following trades through so-called total return swaps, leaving banks such as Credit Suisse Group AG and Nomura Holdings (NYSE:) Inc with about $10 billion of losses.
In a separate filing, Hwang and co-defendant Patrick Halligan, Archegos’ former chief financial officer, said their indictment should be dismissed because Archegos’ trading activity was “entirely lawful,” using methods that are “clearly permitted by the existing regulatory structure.”
A spokesperson for U.S. Attorney Damian Williams in Manhattan declined to comment on Saturday.
In alleging prosecutorial misconduct, Hwang’s lawyers said the government communicated frequently with them over six months, with Hwang sitting for two six-hour interviews, without disclosing that it viewed Hwang as a target and not merely a “subject” of its probe.
These discussions, the last occurring two days before Hwang’s April 27 arrest, “revealed what has now become (as prosecutors doubtless knew it would) his defense strategy,” Hwang’s lawyers said.
“The court should not countenance this lack of candor, breach of prosecutorial duty, and end-run around the Constitution and federal rules,” they added.
Hwang also wants U.S. District Judge Alvin Hellerstein, who oversees the case, to hold a hearing to determine the extent of any taint.
A trial of Hwang and Halligan is scheduled for Oct. 2023. Halligan has also pleaded not guilty.
The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-00240.
