Judge in Archegos founder's criminal case unlikely to dismiss charges
By Jody Godoy and Jonathan Stempel
NEW YORK (Reuters) - A U.S. judge on Tuesday signaled he was unlikely to dismiss an indictment accusing Bill Hwang of fraud in the collapse of his $36 billion Archegos Capital Management LP, after Hwang accused prosecutors of misconduct for duping him into cooperating with their probe. U.S. District Judge Alvin Hellerstein heard arguments in Manhattan federal court on whether to continue the criminal case over Archegos' March 2021 collapse, which saddled banks including as Credit Suisse Group AG and Nomura Holdings Inc with multibillion-dollar losses. Hwang said the U.S. Department of Justice concealed how it viewed him long before his arrest as the mastermind of a vast market manipulation scheme, and prosecutors induced him during two six-hour interviews and other meetings over six months to divulge his defense strategy. He also said the indictment should be dismissed because Archegos' trading had been lawful, and he should not be criminally punished solely because it backfired.
Prosecutors have said they worked in good faith to determine why Archegos collapsed, and treated Hwang fairly. At Tuesday's hearing, Hellerstein said prosecutors were entitled to change their minds about their investigation.
He also said more facts were required before drawing a line between lawful and unlawful trading in the case.Archegos' collapse occurred in March 2021 after Hwang borrowed aggressively to boost the effective size of the firm's market positions in stocks such as ViacomCBS and Discovery to more than $160 billion, according to prosecutors.Authorities said Hwang spread his borrowing among several banks, enabling him to conceal the true size of bets he made through so-called total return swaps, and the risk of doing business with Archegos.When the prices of some of the stocks fell, Hwang was unable to meet margin calls, leading banks to dump stocks backing the swaps, and causing losses for Archegos and others. Credit Suisse lost more than $5 billion in the debacle. The case is U.S. v. Hwang et al, U.S. District Court, Southern District of New York, No. 22-cr-00240.
(Reporting by Jody Godoy and Jonathan Stempel in New York; Editing by David Gregorio)
