The CFTC Accuses Archegos Of Making An Improper Attempt To Get Broad Discovery

According to the CFTC complaint, Archegos and Archegos's CFO, as well as others acting on their behalf or under their direction, engaged in a scheme in which they intentionally and/or recklessly provided false or misleading material information and/or omitted to provide such material information to their trading swap counterparties over the course of a year, between March 2020 and March 2021.

The Department of Justice (DOJ) has attempted to intervene and halt the CFTC proceedings. The defendants maintained that a partial stay would be more appropriate.

On November 23, 2022, the CFTC submitted its response to the defendant's claims in the New York Southern District Court.

The CFTC adds that it takes no position on the United States move to delay discovery awaiting the outcome of the Criminal Case, and hence does not oppose the motion. The CFTC, on the other hand, opposes any attempt by the Defendants to partly stay this action on asymmetrical conditions that would allow Defendants to acquire information while insulating Defendants from having to submit discovery themselves.

According to the regulator, the Court should reject any such request because it is inefficient, inequitable, and would unjustly bias the Commission.

According to the CFTC, defendants claim to object to the “premature” and “blanket” nature of the stay sought by the United States and instead suggest that the Court evaluate each specific future discovery request individually to determine whether such discovery would jeopardize the criminal proceedings or infringe on any person's Fifth Amendment rights. The defendants' approach, on the other hand, implicitly assumes that discovery would be not just incomplete, but also notably asymmetrical.

The CFTC claims that, although the Defendants do not state it specifically, it is evident that Halligan is considering claiming his Fifth Amendment protection against self-incrimination in order to escape discovery under the Defendants' plan. As a result, “discovery,” as envisioned by Defendants, would be a primarily one-sided event.

According to the Defendants' plan, the CFTC must give initial disclosures, reply to extensive document demands, answer interrogatories and requests for admission, and prepare for and attend depositions notified by the Defendants. In contrast, if Halligan and/or Hwang merely state that testifying would violate their Fifth Amendment protection against self-incrimination, the CFTC would be unable to get their testimony or replies to interrogatories and demands for admissions from Halligan.

As a result, the CFTC would be barred from collecting information clarifying Defendants' arguments or defenses, or knowing what facts are in dispute.

The regulator explains that, while Halligan has a right to avoid self-incrimination, defendants do not have a right to use the Fifth Amendment privilege as both a sword and a shield by obtaining the benefits of the privilege against self-incrimination without actually having to assert the Fifth Amendment or suffer the consequences.

The CFTC concludes, “The Court should perceive Defendants' motion for what it is: an inappropriate effort to gain broad-ranging information while Defendants are insulated from disclosing discovery to the CFTC.”

The Commission does not oppose the United States move for a full stay of discovery and urges that the Court rejected the Defendants' proposal for a partial stay.

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