Serious Fraud Office investigators have been forced to don masks and gloves when handling contaminated paperwork relating to the case of Asil Nadir.
The former fugitive, 69, denies secretly transferring £34m out of Polly Peck, leading to its collapse.
SFO lawyers said some papers, dating back to 1991, had been affected by a microbial infection - a team member was treated for burns after touching them.
Mr Nadir was bailed after the Old Bailey directions hearing.
Philip Shears QC, prosecuting, said: "A microbial organism caused one member to go to hospital for burns and difficulties.
"Health and safety issues have had to be thought about."
Some 1,400 boxes of original paperwork were put into storage but an unknown number of papers have suffered a microbial infection, meaning they cannot be handled without wearing gloves and masks.
Trial judge Mr Justice Holroyde said he sympathised and said: "Let's hope there will be no damage to the documents."
At least 900 of the boxes of evidence will be subjected to heat treatment within the coming weeks in an attempt to neutralise the growths.
Polly Peck was Mr Nadir's multi-billion-pound trading empire which stretched from the UK to Turkey.
It collapsed with massive debts in the early 1990s and Mr Nadir was accused of stealing the money from the company.
In 1993, Mr Nadir fled to his native northern Cyprus, which has no extradition treaty with the UK.
He returned to the UK in August this year after the SFO agreed not to oppose bail if stringent conditions were imposed.
But his trial is not expected to take place until 2012 because of the complexity of the allegations.
His lawyers told the Old Bailey the SFO had been aware of a 1991 independent financial report which concluded he did not steal millions from the company.
They said he should not, therefore, have been prosecuted.
The court also heard that 18 of the estimated 280 prosecution witnesses had died.
In court on Friday, Mr Nadir wore a dark grey suit with a white silk handkerchief in his breast pocket. He was allowed to sit next to his solicitor as he has a hearing difficulty, the judge said.
William Clegg QC, for Mr Nadir, claimed a confidential report had been prepared for Polly Peck's administrators which contradicted the Serious Fraud Office's allegations.
The report, he told the court, showed that money alleged to have been stolen from the company in London had been in fact legally transferred to another part of the empire in northern Cyprus.
Its findings would form part of their eventual application to have all charges dropped, he said.
The fact that the report was being compiled was not disclosed to the defence in 1991 or for many years after, said Mr Clegg.
However, its existence and conclusions were known to those engaged in the conduct of the prosecution at the SFO, he added.
Mr Nadir's lawyers will launch a legal attempt in the New Year to have all charges dropped, using the so-called Mantle Report as the basis for their application.
In the meantime, prosecutors at the Serious Fraud Office are trying to track down all the original witnesses ahead of a possible trial in 2012.
Of the 281 on the list, 201 have been found but 18 of them have died.
Mr Nadir was released on bail - which includes an electronic tagging condition and the judge told him that if he did not turn up to court, the case could still be continued in his absence.
Mr Nadir said: "I understand, my lord, and I have been attending meticulously."
"I am much obliged."