Federal prosecutors in Brooklyn have agreed to defer prosecution on five of six defendants, including two Long Island men, in the so-called "squawk box" case.

The agreement follows a rebuke last year from the 2nd U.S. Circuit Court of Appeals, which reversed convictions in the case and criticized the Brooklyn U.S. attorney's office for failing to share exculpatory evidence with the defense.

According to sources familiar with the case, criminal cases will not be pursued against former stockbroker Kenneth Mahaffy of Huntington and former compliance officer Linus Ngwaigwe of Valley Stream, as well as three other defendants.

In a case dating back to 2005 that was tried twice, the government charged securities fraud in a scheme by which brokers piped announcements of large customer orders to a day-trading firm that took advantage of the information.

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The only defendant that prosecutors have not agreed to defer prosecution on is Robert Malin, the former head of the day-trading firm A.B. Watley. Malin's lawyer, Roland Riopelle, said prosecutors want Malin to do two years in prison.

"Mr. Malin wants to continue to negotiate with the government and hopes to resolve his case on terms similar to his co-defendants," Riopelle said.

A spokesman for U.S. Attorney Loretta Lynch had no comment.