Deutsche Bank sued for $150 million in New York by exonerated trader who alleges coverup

By Jonathan Stempel

NEW YORK (Reuters) – Deutsche Bank AG has been sued for $150 million by a former trader whose conviction for rigging the Libor rate benchmark was overturned, and who says the bank framed him to shield top executives from blame.

In a complaint filed on Thursday in New York, Matthew Connolly accused the bank of “malicious prosecution” for making materially false statements to the U.S. Department of Justice, and directing an employee to perjure himself at trial.

Connolly said the German lender viewed him as the “perfect fall guy” though he had “virtually nothing to do” with Libor, to insulate executives who directed its Libor manipulation.

Deutsche Bank’s scapegoating ruined the reputation and career of Connolly, a married father of two, and caused the “destruction of his life,” the complaint said.

The bank said in a statement: “We will vigorously defend ourselves against these claims.”

Libor is short for London interbank offered rate.

Before being phased out in January, it underpinned hundreds of trillions of dollars of financial products including credit cards, mortgages and other loans.

Investigations worldwide into Libor manipulation resulted in about $9 billion of fines for banks, including $2.5 billion for Deutsche Bank in 2015.

Connolly had led Deutsche Bank’s pool trading desk in New York before leaving in 2008.

He and London-based colleague Gavin Black were indicted in 2016 and convicted in 2018 for rigging Libor, with Connolly sentenced to six months of home confinement and a $100,000 fine.

A U.S. appeals court overturned their convictions in January, however, citing a lack of evidence they were guilty.

Connolly sued Deutsche Bank four weeks after a New York judge tossed a Libor-rigging indictment against former UBS and Citigroup trader Tom Hayes and another trader.

Prosecutors said the overturning of Connolly and Black’s convictions undermined those cases. Hayes had already served more than five years in prison in Britain for rigging Libor.

Citigroup faces a separate $112 million lawsuit in New York where former trader Rohan Ramchandani accuses it of scapegoating him in a U.S. criminal probe into rigging foreign exchange.

The case is Connolly v. Deutsche Bank AG, U.S. District Court, Southern District of New York, No. 22-09811.

(Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis)