NEW YORK (Reuters) -A U.S. appeals court on Thursday voided the 2017 fraud conviction of a former HSBC executive who spent two years in prison for "front-running" a British oil and gas exploration company's $3.5 billion currency trade.

In a 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said Mark Johnson's conviction was tainted because the Supreme Court in an unrelated case later repudiated a fraud theory that underlay it.

The appeals court also expressed "grave doubt" Johnson could have been convicted under an alternative theory that he defrauded HSBC client Cairn Energy, now known as Capricorn Energy.

A spokesman for the U.S. attorney's office in Brooklyn declined to comment.

"We are delighted that justice has finally been achieved for Mark Johnson," his lawyer Alexandra Shapiro said in a statement. "Mr. Johnson carried out the Cairn transaction consistent with industry practice and in violation of no law or rule."

Johnson, a British father of six in his late 50s, had been the head of HSBC's global foreign exchange cash trading desk.

He was the first banker tried in the United States on currency rigging charges, following global probes into the multitrillion-dollar per day currency market.

According to prosecutors, Cairn had retained Johnson and another former HSBC executive in 2011 to convert $3.5 billion into British pounds sterling as it prepared to sell an Indian subsidiary.

Prosecutors said the executives quietly bought pounds for HSBC's own accounts before completing Edinburgh-based Cairn's trade, reaping a profit of about $7 million, court papers show.

A jury convicted Johnson of wire fraud and conspiracy after a four-week trial. The appeals court upheld the conviction in 2019.

But on Thursday, the appeals court said a 2023 Supreme Court ruling, Ciminelli v U.S., meant Johnson could not be convicted of denying Cairn a right to control its assets by reneging on a promise not to ramp up the pound's price.

Circuit Judge Guido Calabresi also said evidence that Johnson breached duties to Cairn by misappropriating its confidential information for his own benefit was "weak," and it was unlikely a jury would convict Johnson on that basis alone.

"We find ourselves--at the very least--in 'virtual equipoise' as to whether any jury, presented only with the misappropriation theory, would convict Johnson," Calabresi wrote. "That is more than enough to leave us with grave doubt."

The appeals court returned the case to U.S. District Judge Nicholas Garaufis, who oversaw the trial.

The case is Johnson v. U.S., 2nd U.S. Circuit Court of Appeals, No. 24-1221.