A federal appeals court reversed the convictions of two former Deutsche Bank AG traders for rigging a global lending benchmark, overturning one of the U.S. government’s highest-profile court victories linked to the 2008 financial crisis, reports the Wall Street Journal. The decision dealt a blow to the results of a major investigation after the financial crisis, when prosecutors were criticized for not pursuing enough cases against individual traders and executives. The cases focused on how traders and brokers influenced the daily London interbank offered rate, known as Libor, which helped set the value of lucrative derivatives they traded and made banks appear healthier than they were.
Thursday’s reversal shows how difficult it has been for prosecutors to use antifraud laws to punish traders competing in sophisticated markets where standards of conduct weren’t clearly documented. A panel of the U.S. Court of Appeals for the Second Circuit found that evidence used to convict Matthew Connolly and Gavin Black wasn’t enough to stand up fraud and conspiracy charges. A New York jury convicted them in 2018. “Wire fraud is an enormously expansive statute, but the government needs to remember that violations ... need to be concrete, clear, and easily understandable if they are going to serve as a basis for a criminal conviction,” said Stetson University law Prof. Ellen Podgor. The new court action means every Libor trial conviction in the U.S. has now been overturned. Six other traders from Rabobank and Deutsche Bank pleaded guilty in the U.S. to Libor-related misconduct from 2014 to 2016.