Hayes Calls for All Rate-Rigging Convictions to Be Overturned

(Bloomberg) — Tom Hayes, the ex-UBS Group AG trader cleared of manipulating Libor by UK judges, says the other traders convicted of rigging benchmark interest rates should have their cases overturned. 

“The other seven convictions — they all need to go,” Hayes said in an interview with Bloomberg TV on Thursday. “This is a battle in a war, and we won the first battle.”

On Wednesday, the UK Supreme Court quashed the convictions of Hayes and ex-Barclays Plc trader Carlo Palombo, 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.

The question now remains what next for Hayes — be it a return to financial services or pursuing further legal action against UK agencies or his former employees. His lawyer is calling for a public inquiry into the Serious Fraud Office’s investigation.

“I’ve got friends who run funds over in Hong Kong who I might be able to go and work with,” Hayes said in the interview. “I’ve got no idea right now.”

Now his conviction has been overturned, Hayes said that he wasn’t sure of his regulatory status given a lifetime ban imposed on him by the Financial Conduct Authority had been stayed by the courts. “That should not now go ahead because I’ve had my conviction overturned,” he said.

Palombo and Hayes were two of nine traders convicted in the UK for manipulating key interest rates, with other traders at Barclays and Deutsche Bank AG handed prison sentences. Two of those pleaded guilty, but all of the convictions followed Hayes’ guilty verdict in a trial that has now been ruled unfair by the highest court in the land. 

The scandal — over the fixing of benchmark rates that underpinned more than $350 trillion of loans and securities — burst into public view at time when the banking community still faced outrage after the 2008 financial crisis and led to global fines of almost $10 billion for a dozen banks and brokerages.

“We were scapegoated,” Hayes said. “We were accused of causing the global financial crisis, which we had nothing to do with. How Japanese-Yen Libor moving around by 1000 of a percentage point had anything to do with global financial crisis is completely beyond me.”

Setting the reference rate was in the power of a handful of traders at a group of 16 of the world’s largest banks. Each morning they had the task of submitting the rate at which banks were charged for lending to one another. Once submitted, the top and bottom 25% of submissions would be removed and the remaining numbers averaged.

The rate was supposed to reflect banks’ cost of borrowing from one another  — but by making artificially higher or lower submissions, traders could affect the final rate to the benefit of their trading positions.

The ruling, 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 how the embattled Serious Fraud Office can recover some credibility after the latest in a long history of setbacks. The Libor prosecution was seen as a high point for the prosecutor at a time when there was public clamor to hold bankers to account for wrongdoing. 

The SFO, who opposed Hayes’ appeal the entire way through the process and maintained the convictions were secured fairly, said it won’t be seeking a retrial. 

“One thing I think which is instructive is they haven’t sought a retrial,” Hayes said of the SFO. “I actually sort of wanted a retrial to be honest.”

–With assistance from Jonathan Browning and Lauren Tavener.

(Updates throughout)

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