Deutsche Bank settles with trader who alleged he was Libor ‘fall guy’

Deutsche Bank has settled a lawsuit brought by an exonerated former trader who alleged he was the “fall guy” of the Libor rate-rigging scandal.

Matthew Connolly, 58, was convicted of fraud in 2018 in one of the highest-profile US trials over the rate manipulation saga that cumulatively cost banks billions of dollars in penalties and fines. He was later branded “the least culpable person” at Deutsche by the federal judge who oversaw the case and fully acquitted on appeal.

The former head of Deutsche’s New York derivatives trading desk, Connolly sued Deutsche in November 2022, seeking $150mn in damages and accusing the bank of framing him for the crimes of others.

The lender had convinced the government to “pursue, indict, scapegoat and prosecute Connolly”, said his lawyers at the time, adding that he “had virtually nothing to do with Libor” at the bank.

A one-page filing to Manhattan federal court on Wednesday stated the case had been voluntarily dismissed with the agreement of both parties, but did not provide any further details.

Jonathan Harris, a lawyer for Connolly, declined to comment. A spokeswoman for Deutsche Bank said “the matter has been resolved” but declined to comment further. In previous filings in the case, the bank claimed Connolly “engaged in conduct considered by both the government and the district court at the time to be criminal” and denied it had sought to scapegoat him in the subsequent investigations.

Deutsche has already paid $2.5bn in fines over the Libor scandal, in a 2015 settlement with US and UK law enforcement. The bank was also forced to fire seven employees, but its management board, which claimed it was unaware of any misconduct, emerged unscathed.

Soon after, Connolly and a former Deutsche employee in London, Gavin Black, were indicted by US prosecutors and charged with fraud over an alleged scheme to manipulate Libor “to their advantage” “by making false and fraudulent” submissions to the market. Both were convicted following a month-long jury trial in Manhattan.

Connolly and Black had their convictions quashed on appeal in early 2023, in a ruling that concluded “the government failed to show that any of the trader-influenced submissions were false, fraudulent, or misleading”.

Charges against other bankers allegedly involved in the Libor-rigging scandal were also tossed out in the same year, including those brought against former UBS and Citi trader Tom Hayes and former trader Roger Darin. 

Hayes, whose attempts to clear his name in the UK have thus far been unsuccessful, has taken his appeal to the country’s supreme court.

Mediation talks with Black, who sued Deutsche last year in New York state court on similar grounds, broke down in April. The case is in the fact discovery stage.