Ex-Deutsche Bank Trader Sues Bank for Malicious Prosecution

(Bloomberg) — A former Deutsche Bank AG trader cleared of charges that he rigged the Libor benchmark rate has sued the bank for malicious prosecution, saying the company made false and misleading statements to get him prosecuted in the US.

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The trader, Matthew Connolly, and a colleague, Gavin Black, were found guilty in New York of wire fraud for rigging Deutsche Bank’s Libor submission in 2018. But an appeals court cleared them in January, saying prosecutors failed to prove the two men influenced the bank into making false or misleading submissions.

On Thursday, Connolly sued the German company in the same Manhattan federal court where he’d been tried, alleging Deutsche Bank made false statements to the US Justice Department and left out information “to have Connolly prosecuted and convicted to protect senior executives at the bank.”

Deutsche Bank said it would defend against the claims.

According to the lawsuit, “when the government began investigating LIBOR pricing several years later, the senior executives of Deutsche Bank, who had been overwhelmingly more involved in LIBOR pricing than Mr. Connolly and, in fact, had orchestrated it, identified their perfect fall guy and hand-delivered him to the government wrapped up in a bow: Matthew Connolly.”

Connolly is seeking more than $150 million, “to compensate him for his economic losses and the torment he and his family have suffered, including damage to his reputation and to punish Deutsche Bank for its role in directing the destruction of his life.”

Deutsche Bank agreed in 2015 to pay $2.5 billion and fire seven traders, including Black, to resolve probes into its role in the scandal. But the two men maintained they were being blamed for a practice that was common in the industry and encouraged by the bank’s leaders.

After their convictions, US District Judge Colleen McMahon declined to sentence Connolly and Black to prison terms, saying she couldn’t make them “scapegoats for the entire industry” because they were “very minor participants.”

Libor Crackdown

Prosecutors in the US and the UK have sought to hold individual traders responsible for rigging Libor, which has been used to value financial products from mortgages to car loans but is being phased out because of alleged bank manipulation. But while a handful have been convicted and sentenced to prison terms, a dozen others were cleared of charges.

Another former trader swept up in the investigation, ex-Citigroup Inc. trader Rohan Ramchandani, filed a similar suit against his company in 2019, saying the bank made him a “scapegoat” in a US investigation of foreign-exchange price fixing.

A federal jury in 2018 rejected prosecutors’ charges that Ramchandani, Richard Usher, a former JPMorgan Chase & Co. foreign exchange trader, and Chris Ashton, the ex-head of spot FX trading at Barclays Plc, rigged the foreign exchange market from 2007 to 2013 by coordinating trades and manipulating prices.

Deutsche Bank “knew that its C-suite and other senior executives had directed Deutsche Bank’s efforts to affect the Libor Rate,” Connolly said in his suit. “In order to protect itself and its elite upper echelon, Deutsche Bank and its lawyers convinced the DOJ to instead pursue, indict, scapegoat and prosecute Connolly.”

The case is Matthew Connolly v Deutsche Bank AG, 22-cv-9811, US District Court, Southern District of New York.

(Updates with Deutsche Bank comment in fourth paragraph.)

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