A federal appeals court on Monday ordered a new trial for an Ivy League-educated scientist, tossing out his conviction for violating the Iran trade embargo and finding he deserves a second chance to show he wasn't part of an unlicensed money transfer business.

The ruling by the 2nd U.S. Circuit Court of Appeals in Manhattan came too late to spare Mahmoud Reza Banki from serving most of a 2 1/2-year sentence imposed for his conviction in June 2010. The court upheld two false-statement charges against Banki, but the charges most likely would have brought a sentence of less than six months in prison.

The appeals court ruling brought a measure of redemption for Banki, whose lawyers argued at trial that he had the "state of mind of an innocent man" as he patiently submitted to repeated interviews by federal officials investigating his money transfers over an eight-year period.

Banki, 35, was born in the Iranian capital, Tehran, but has been a U.S. citizen since 1996. The appeals court said it threw out his conviction for violating the Iran trade embargo — which was initiated in 1995 and prohibits U.S. citizens from supplying goods, services or technology to Iran or its government — because the law clearly states that family remittances are exempt and the law is confusing at best on the subject.

The court ordered a new trial on charges accusing Banki of participating in an illegal money transfer business known as a hawala, which relies on wire transfers, couriers and overnight mail. The case drew fresh attention to hawalas and the dangers they may pose to the United States.

Defense lawyers had argued that Banki only knew he was receiving money from relatives in Iran. The government said Banki, who had worked for a management consulting firm, McKinsey & Co., had about $3.4 million deposited in his bank account. Prosecutors said he bought a $2.4 million Manhattan condominium and made payments on his credit card with much of the money.

Lawyer Kathleen M. Sullivan, who argued the appeal on Banki's behalf, said the ruling was a "major vindication" for her client, who she said had never run a hawala or any other banking business.

"We think it's also a major vindication of the rule of law as applied to transactions on which the Iranian-American community depends," she said.

Sullivan said the case against Banki was the first prosecution in the country of a person for violating the Iran trade embargo when he or she did not run a business.

Banki attended Purdue University and the University of California at Berkeley before getting a doctorate in chemical engineering from Princeton University. One of the sentencing letters written on his behalf came from 2003 Nobel Peace Prize recipient Shirin Ebadi.

At sentencing, defense attorney Baruch Weiss requested leniency, saying Banki wanted to return to his dream of finding ways to finance stem cell research so replacement organs such as kidneys could be produced without the need for donors.

Weiss said Monday he hadn't spoken yet with Banki, who's housed at a federal camp in California.

"This is good news from the appeals court and vindicates the defense position from the outset that this case should never have been brought," Weiss said. "In the long term, he's got to put his life back together. He's extraordinarily accomplished, and I have no doubt that ... he'll ultimately be a terrific success in life."

A hearing has been scheduled for Nov. 9, when defense lawyers will request that Banki be released on bail.

A spokeswoman for prosecutors, Jerika Richardson, declined to comment.