Ex-Libor Trader Tom Hayes Wins Bid to Overturn Rigging Conviction

(Bloomberg) — Tom Hayes, the former star UBS Group AG trader who was the face of the Libor rigging scandal, won a bid to overturn his criminal conviction, clearing his name a decade after he was sent to jail. 

In a stunning reversal, the UK Supreme Court quashed the convictions of Hayes and ex-Barclays Plc trader Carlo Palombo on Wednesday. The court allowed both appeals, stating that the juries had been misdirected by judges at both criminal trials. Hayes was given an 11 year sentence after appeal for rigging Libor in 2015, while Palombo was jailed for four years in 2019 for manipulating Euribor.

Hayes “was deprived of that opportunity by directions which were legally inaccurate and unfair,” the judges said in the ruling.

The scandal — over the fixing of benchmark rates that underpinned more than $350 trillion of loans and securities — broke out when the banking community still faced public outrage after the 2008 financial crisis and led to global fines of almost $10 billion for a dozen banks and brokerages. Serious Fraud Office prosecutions led to nine convictions of bankers for fraud offenses.

The ruling, in one of the most high profile financial crime prosecutions in the past decade, should pave the way for several other convictions over tampering the rates setting process to be appealed. It will also raise serious questions around the Serious Fraud Office’s ability to make complex financial prosecutions stick.

“I need to sit in a dark room on my own and try and figure out what’s just happened,” Hayes said in a phone interview with Bloomberg. “It’s been going on for so long and now it’s suddenly over, it’s a very strange and surreal situation.”

It’s the latest in a long list of setbacks for the embattled prosecutor who must now reckon with the fact that its flagship investigation of the last 15 years now lies in tatters. The SFO said in a statement that it won’t seek a retrial as it would not be in the public interest.

“We were accused of things that didn’t make sense — we were caught up in this Kafka-esque nightmare,” Palombo said at a press conference after the decision. Rate-rigging defendants were cast as “dishonest greedy bankers.”

Deutsche Bank AG’s Christian Bittar and Barclays’ Philippe Moryoussef and Jay Merchant are among a group of seven other men who were convicted over rate rigging. Hayes and Palombo have now made their route to redemption much easier.

Hayes, who also worked at Citigroup Inc., was the “ringmaster” of a global network of 25 traders and brokers from at least 10 firms who tried to manipulate Libor on an industrial scale to maximize profit, prosecutors said at his trial. Ever since he was released from prison in 2021, Hayes has tirelessly fought the notion that what he did was a criminal offense.

 

“My faith in the criminal justice system in the UK was at times likely destroyed and its been restored by the justices at the supreme court today,” Hayes said on the steps of the Supreme Court flanked by his legal team.

Lawyers for Hayes had argued during the appeal that it was permissible for a bank to consider its trading advantage when making their submissions for Libor or Euribor. The juries that convicted Hayes and Palombo were unfairly told by the judge that taking the bank’s commercial interest into account was unlawful, the lawyers said.

The SFO argued that Hayes and Palombo conspired with others to dishonestly manipulate the process to set the interest rates at which banks could borrow money. Hayes engaged in the criminality to enhance his bank’s profits and increase bonus payments for himself, the Serious Fraud Office previously argued.

“The history of the two cases raises concerns about the effectiveness of the criminal appeal system in England and Wales in confronting legal error,” the judges said in their unanimous decision. “In each case there was ample evidence on which a jury, properly directed, could have found the appellant guilty of conspiracy to defraud. But the jury was not properly directed.”

–With assistance from Upmanyu Trivedi and William Shaw.

(Updates with Palombo comment in the eighth paragraph)

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