Archegos founder Hwang seeks sanctions over prosecutors’ ‘grave failure’ on data

By Jonathan Stempel

NEW YORK (Reuters) -The founder of Archegos Capital Management, the once-$36 billion private investment firm that collapsed spectacularly in 2021, on Monday sought to block prosecutors from introducing huge quantities of trading data at his upcoming fraud trial, citing their “grave failure” in withholding the data for 17 months.

In a filing in federal court in Manhattan, Bill Hwang said the defense learned on Friday that prosecutors had failed to produce 14 gigabytes of data, comprising 27 million rows and 63 columns, despite having obtained them in November 2021.

Hwang said his preparation for the Feb. 20 trial has been “hamstrung” without the data, which he said prosecutors should have disclosed in August 2022, and which he began asking for two months later.

“The prosecution lulled the defense for well over a year into believing the undisclosed trading data did not exist,” the filing said. “In doing so, the prosecution and its experts have gained an enormous informational advantage that jeopardizes the defendants’ right to a fair trial.”

Hwang said additional sanctions could be in order. His co-defendant, former Archegos Chief Financial Officer Patrick Halligan, joined his request.

In a Monday night filing, the office of U.S. Attorney Damian Williams in Manhattan called Hwang’s motion a “naked attempt at gamesmanship” to keep jurors from hearing the facts, and rejected any suggestion that the data were “entirely new.”

Prosecutors asked a judge that they be given until Friday to formally oppose Hwang’s motion.The trial could last two months, or less if some or all of the disputed data were excluded.

A lawyer for Hwang declined additional comment.

Archegos’ March 2021 collapse stemmed from Hwang’s use of financial contracts known as total return swaps to take outsized stakes in his favorite holdings, including ViacomCBS (NASDAQ:).

Authorities have said Archegos borrowed aggressively to gain trading capacity and achieve $160 billion of exposure to stocks, but was unable to meet margin calls when prices began falling.

That led some banks to dump stocks backing his swaps, causing big losses for Archegos and banks such as Credit Suisse, now part of UBS, and Nomura Holdings (NYSE:).

The U.S. Securities and Exchange Commission is pursuing related civil charges against Hwang and Halligan.

The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-cr-00240.