Instead, Russell instructed jurors that the “term ‘security' includes a note.”
That instruction is contrary to U.S. Supreme Court precedent, the appellate judges stated as their reason for reversing the conviction.
Russell's instruction permitted jurors to convict McKye without prosecutors having to prove the notes were securities, he argued in his appeal.
The appellate judges said Russell accepted the argument of a prosecutor that notes are presumed to be securities.
The U.S. attorney's office did not respond immediately to a request for comment about what it plans to do in view of the decision.
Federal Bureau of Prisons records state McKye is serving his term at a prison near Dallas.
Co-defendant Joe Don Johnson was sentenced to nearly 10 years in prison for his roles in the crimes. Russell ordered the two men jointly to pay $4.6 million in restitution to their victims.
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