A US court has overturned the convictions of two former Deutsche Bank traders for allegedly rigging the London Interbank Offered Rate (Libor).
A three-judge panel at the Second United States Circuit Court of Appeals in Manhattan ruled that the U.S. government “has failed to demonstrate that any of the merchant-influenced submissions are false, fraudulent, or misleading.”
Prosecutors had brought charges in 2016 against Gavin Black, the director of Deutsche Bank’s money markets and derivatives office in London, and his New York-based colleague, Matthew Connolly.
The couple were convicted two years later of wire fraud and conspiracy to commit wire and bank fraud.
They appealed on the grounds that the prosecution had failed to show that they had violated the law.
The appeals court agreed in its opinion published Thursday, saying “there was insufficient evidence to prove that the defendants caused (Deutsche Bank) to make statements about Libor that were false or misleading.”
The Libor benchmark has now been largely phased out, but used to be a system for determining how much banks should pay to borrow money from other banks. It was a vital measure that for years partly supported the interest rates that mortgage lenders would pay.
The figure was released daily on an average of what 18 major banks anonymously said they were willing to pay to borrow.
However, in the early 2010s, some banks had submitted false figures from which the average was calculated, manipulating the price of Libor in order to benefit their trading arms.
The figures meant Libor was incorrectly pegged by tiny amounts, but as the system underpinned around $300trillion in contracts worldwide (£217trillion) it resulted in huge gains for some.