About a fortnight after former Deutsche Bank traders Matthew Connolly and Gavin Campbell Black pushed for acquittal in a lawsuit accusing them of LIBOR rigging, the New York Southern District Court has issued the relevant orders.

Judge Colleen McMahon has signed judgments of acquittal as to Mr Connolly and Mr Black. This happens after the Second Circuit Court of Appeals had reversed the judgment of conviction in this matter, and remanded the case to the district court for entry of a judgment of acquittal.

Let’s recall that Matthew Connolly and Gavin Campbell Black appealed from judgments entered in the United States District Court for the Southern District of New York following a jury trial before Colleen McMahon, then-Chief Judge, convicting both defendants on one count charging a 2004-2011 conspiracy to commit wire fraud and bank fraud in violation of 18 U.S.C. § 1349, convicting Connolly on two counts of wire fraud in violation of 18 U.S.C. § 1343, and convicting Black on one count of wire fraud in violation of § 1343, all in connection with the submission of statements that could affect the London Interbank Offered Rate (“LIBOR”), on which many financial transactions rely.

On appeal, defendants contended principally that the evidence at trial was insufficient to prove that the LIBOR submissions at issue were false, material, or made with fraudulent intent.

The Appeals Court explained that there are several respects in which the trial evidence, viewed as a whole, failed to support the foundations of the government’s theory of falsity, i.e., that there was (a) one true interest rate, (b) automatically generated by the pricer, (c) which was DB’s LIBOR submission as generated except when there was a request from a trader.

For instance, the testimony of the government’s witnesses revealed that there were many factors other than the data automatically received by the pricer that informed DB’s final LIBOR submission. Also, there were many loans available to DB, with varying interest rates; and as DB could agree to such rates, there was no one true rate that it was required to submit.

In sum, the government sought to prove falsity on the premise that the BBA LIBOR Instruction required DB to submit a particular interest rate, that such a rate was generated automatically by a DB pricer, and that LIBOR submissions that were influenced by requests from DB derivatives traders were false because those submissions were not the numbers automatically generated by the pricer.

However, the government’s main fact witnesses at trial, the LIBOR submitters, testified that there were numerous ways in which the pricer did not generate such numbers automatically because those witnesses regularly altered pricer data and spreads manually; that the LIBOR submitters regularly deviated from the pricer output—even as affected by the submitters’ manual adjustments–in order to make LIBOR submissions that reflected interest rate estimates they had received from independent brokers; and that the LIBOR submitters engaged in all of these practices even on days when they had no requests from DB derivatives traders.

The government failed to produce any evidence that any DB LIBOR submissions that were influenced by the bank’s derivatives traders were not rates at which DB could request, receive offers, and accept loans in DB’s typical loan amounts; hence the government failed to show that any of the trader-influenced submissions were false, fraudulent, or misleading.

While defendants’ efforts to take advantage of DB’s position as a LIBOR panel contributor in order to affect the outcome of contracts to which DB had already agreed may have violated any reasonable notion of fairness, the government’s failure to prove that the LIBOR submissions did not comply with the BBA LIBOR Instruction and were false or misleading means it failed to prove conduct that was within the scope of the statute prohibiting wire fraud schemes.

Accordingly, the Appeals Court reversed defendants’ convictions for wire fraud.