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In Hwang Trial For Archegos $34B Meltdown Jury Charge Tweaked by Judge for Closings

By Matthew Russell Lee, Patreon Substack

SDNY COURTHOUSE, July 2 –  In the wake of the Archegos meltdown, the other shoe dropped on April 27, when the US Attorney for the SDNY unsealed and indictment charging Bill Hwang Patrick Halligan, Archegos’s CFO with racketeering conspiracy, securities fraud, and wire fraud offenses.   

 Inner City Press went to the SDNY press conference to ask, What about Credit Suisse and Nomura and people in those banks? What about the massive family office loophope to the Investment Advisors Act of 1940? This has come up in the OneCoin fraud case, on which the Office used perjured testimony and now agrees to delay after delay.

 Damian William referred obliquely to Hwang doing it in the dark, but otherwise the issue - which is addressed by a pending bill in Congress - did not come up. Nor did Lisa Monaco, present in New York for the presser, address it.

On June 1, newly assigned District Judge Alvin K. Hellerstein held a conference in the case. Inner City Press attended and live tweet it here (and asked defense counsel a question later, here). Thread here.

And after, stand-up here, short Q&A here.

On June 20, 2023  Judge Hellerstein  pushed the trial back: "Trial in the above-captioned criminal matter, by request of all parties, is adjourned from January 9, 2024 to February 20, 2024 at 10:00 a.m., in Courtroom 14D. The Final Pretrial Conference will be held on February 14, 2024 at 2:30 p.m. Time is excluded in the interest of justice from January 9, 2024 to February 20, 2024 pursuant to 18 U.S.C. § 3161. SO ORDERED (Signed by Judge Alvin K. Hellerstein on 6/20/2023)."

On July 27, Hwang wrote in seeking approval of subpoenas to Goldman Sachs, Morgan Stanley, Bank of Montreal, Credit Suisse, UBS, Nomura, MUFG, Mizuho, Macquarie, Jeffries and Deutsche Bank, to show he did not "use his lawfully executed swaps to artificially impact the prices of the underlying stocks."

Jump cut to November 14, 2023 when Judge Hellerstein held an oral argument on the subpoena requests. Inner City Press attended, in mask, and tweeted, threadette:

Hwang is here at defense table, with COVID mask and foyr lawyers at table, one behind. 

Judge Hellerstein: Manipulation for manipulation is meaningless. How was it intended to make money? When? There are many different ways to hedge. I'd like to see them narrowed

 Berke: Your Honor, you've done a lot of cases, but this is the 1st one in which DOJ is charging manipulation of swaps

Judge: It's hard to defend against manipulation. Mr Berke deserves a discussion. US v Nixon provides the boundary.

Berke: Thank you

  And well he might say that - it seemed the defense won this round. He mocked what he called the prosecution's theory of "pump and brag," that Hwang did it to brag he'd built a family office into a major firm.

On January 3, 2024, still mostly masked, Judge Hellerstein said the proposed experts are qualified, that sufficient notice is the issue. He said he will follow Judge Jed Rakoff's decision in US v. Mrabet, which Inner City Press also covered.  At the end Judge Hellerstein said, with a laugh, Don't settle this case, I want to try it.

More details on Substack here

On May 1, 2024, the US Attorney's Office wrote in to specify that at trial they intend to put forward evidence about Archegos' predecessor Tiger Asia, including that the SEC banned Hwang from acting, among other things, as an investment adviser.

On May 6, Halligan's counsel wrote in that the evidence should not be admitted at trial, as little of it involves Halligan but he would be prejudiced by it.

On May 15 in the trial, Mr. Marks of Operations testified about reports only to Bill and Patrick, then Mr. Jones about flying from Dallas amid the meltdown. Thread here

On May 21, the US insisted that evidence of Hwang's "decision not to reimburse employees for lost deferred compensation" should remain in evidence before the jury."

Full letter on Patreon here.

On May 22, Inner City Press live tweeted cross examination of cooperator Becker, here. In the midst of it, an announcement by Judge Hellerstein of the birth of a baby, and applause in the courtroom (it's in the thread).

On May 23, Becker continued - from the thread:

Becker is asked about his message, "Whatevs, we'll just roll with it."

Counsel: Turning to your lost vacation days, Mr. Becker, you felt you had never worked harder than at Archegos, isn't that true? Becker: Yes.

Counsel: You had 3 weeks of vacation - couldn't carry it over and you were angry, right? Becker: Correct.

Halligan's lawyer: You didn't want Mr. Halligan involved in your project, did you? He called you careless-

Judge Hellerstein: Haven't we gone over this? It's done. Finished. Halligan's lawyer: You felt he didn't show appreciation Judge Hellerstein: Move on

 Now re-direct: AUSA: Mr. Becker, Mr. Berke didn't show you this sheet, did he? Objection! Overruled. Becker: He didn't.

 AUSA: You were asked some questions about conversations with Mr. Halligan. Why was it so frantic? Let me off this March 23 chat, 3745

 Judge Hellerstein: Jurors, have a good weekend. [Jurors leave] Defense: Can we discuss schedule for next week? Judge: Tues and Wed 10 to 5. Can't say about Thursday. Government, how are we doing?

AUSA: We expected Becker 1 week, on schedule

Judge Hellerstein: Done in 2 weeks? AUSA: That's aggressive.  Adjourned.

On May 28, the US Attorney's Office filed a letter seeking permission in advance to ask "what if you had known" questions of the type blessed by the 2d Circuit in US v. Cuti (2013), starting with Bank of Montreal's Joseph Boccuzzi on May 29. Letter on Patreon here

May 29 ended with a dispute about a government chart, long and short positions, which Hwang's lawyer Berke called argumentative, from the thread

On June 5, Inner City Press live tweeted, thread

On June 6, government expert testified about, among other things, dark pools, thread

On June 10, cooperation William Tomita began on the stand, from thread:

Tomita: Yes. They were traders, executing the trades on behalf of Bill. Bill would yell at me, Don't list to Andy, you answer to me

On June 11, Tomita continues. From thread:

On June 14 to start the trial day after a two day hiatus, counsel for Halligan complained about Bank of America witness / issue, thread.

On June 17, Tomita still on the stand, thread

Scheduling: In US v. Hwang (Archegos) case, Judge Hellerstein was just asked about when closing arguments will / can be. He said he'll tell the jury they will *try* to finish before July 1 - one juror has to end then, or be replaced - but closings on July 8 were also floated

On June 18, Tomita was on the cross, thread

On June 20, after Juneteenth, Tomita was on cross, thread

On June 21, yet more Tomita cross, Inner City Press was there, from the thread

On June 24, Tomita being crossed by Halligan's lawyer, from the thread

  On June 25 things descended into fight about summary charts versus demonstratives, from the thread:

OK - now Tuesday in US v. Hwang of Archegos, with prosecution responding to objection by co-defendant Halligan's counsel.

AUSA: The chart now shows March 2021- Judge: My suggestion is to put it down by month. Halligan's lawyer: The blue bars identify the problem; they don't solve it. The left territory IDs five data points. The right territory represents a shorter period of time.

 Judge: What don't you call it a cash projection, not an estimate? AUSA: Fine, your Honor, we'll change that. Defense: This is not really a summary chart. It's more of a demonstrative, that they should only be allowed to use in summation.

On June 26, the US rested, and defense witness took the stand. From the thread.

On June 27, Judge Hellerstein said that the charge conference will be July 1 - and closings July 8. Thread

On June 28, a defense expert was cross examined.

On July 1, from the charging conference, from the thread.

On July 2, after the conference, Judge Hellerstein tweaked the charge: "ORDER FOLLOWING CHARGING CONFERENCE as to Sung Kook (Bill) Hwang, Patrick Halligan. The parties are divided as to what constitutes an unlawful manipulation, and how it should be charged. The Government argues that an intent to manipulate and the creation of an artificial price suffices. Defendant Hwang argues that that must be the exclusive intention, and that he cannot be guilty of a manipulation if he also had the intent to amass a position for investment purposes. The leading case is United States v. Mulheren, 938 F.2d 364 (2d Cir. 1991). The Court held that an ambiguous remark by one buyer of a stock to another was insufficient to prove an intent to manipulate a stock price. If, however, "chicanery" existed, and there were other "indicia of manipulation," the defendant could be found guilty. 938 at 372. The Court of Appeals cited In re Delafield & Delafield, [1967-69 Transfer Binder] Fed. Sec. L. Rep. (CCH) para. 77, 648 (SEC 1969), an SEC consent decree, where the holder of a large short position masked his sales by effecting them through two foreign banks. In the case at bar, there is substantial proof that defendant Hwang gained the capacity to make his purchases by material misrepresentations to counterparties to support their extensions of margin credit, and to enter or continue in counter-party positions. The jury may find the deception a "chicanery" that enabled defendant, through Archegos, to amass large positions in the stock at issue. There follows the charge reflecting the appropriate proposition of law, to be inserted in the section defining Counts Three through Nine: The government must prove beyond a reasonable doubt that Mr. Hwang, intending to create an artificial market for the securities at issue, engaged in, or directed others to engage in, a series of transactions and swap agreements to create increasingly higher than natural prices for such securities, thereby artificially increasing the value of Archegos' holdings; or, in the case of transactions in short positions, to create artificially low prices for such securities to increase profits when it came time to close such short positions. However, there is an exception, and an exception to the exception. You should not consider Mr. Hwang guilty of manipulation if his purpose in buying the securities, or entering into the swap agreements, was to accumulate a position for long-term investment. Provided, however, and here is the exception to the exception, Mr. Hwang did not employ chicanery to accumulate his holding. Chicanery is another term for deceptive or misleading words or conduct intended to induce another to do something, or to refrain from doing something, that that person would not otherwise have done. So, if you find that Mr. Hwang gained capacity to buy and sell securities and swaps through chicanery, directly or through others, to induce counter-parties to extend margin loans or to enter or remain in counter-party arrangements, thereby creating Archegos' investment positions, you may find Mr. Hwang guilty of the crime charged. The government must prove each and every element beyond a reasonable doubt: that Mr. Hwang intended to manipulate market prices; that his intention was wrongful and willful; that an artificial market was created; and that the holdings thereby gained either were not for long-term investment or, if for long-term investment, that the position was not gained through chicanery. SO ORDERED. (Signed by Judge Alvin K. Hellerstein on 7/2/2024)"

Back on March 21, 2023 Judge Hellerstein held an hour and a half proceeding in which he denied more than a dozen motions by Team Hwang. Inner City Press was there and live tweeted, thread here.

More including on Halligan on Substack here.

  Later  - after re-up of book and talk to NYU Journalism School, here and here - in the SDNY Magistrate a defendant was detained until trial, charged as a felon in possession. We'll have more, much more, on this.

The case is US v. Hwang, 22-cr-240 (Hellerstein)


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