Tom Hayes Libor Victory Puts Convictions in $10 Billion Scandal at Risk

Mint

24-07-2025

(Bloomberg) -- It was an era-defining prosecution for the UK's white collar crime agency.
When star trader Tom Hayes was found guilty of rigging a benchmark interest rate in 2015, it set off a raft of other investigations of bankers and traders across the City of London.
For the Serious Fraud Office, desperate to highlight that it could hold bankers to account, these actions marked a high-water point. On top of that, regulators made headlines by wringing global fines of almost $10 billion from a dozen banks and brokerages.
Now, Hayes' success in quashing his conviction at the UK Supreme Court has upended it all and hit the SFO's reputation. It also raises questions about other convictions in the scandal.
'This result not only clears Mr. Hayes' and Mr. Palombo's names, but could also lead to convictions secured in,' other trials prosecuted by the SFO being reviewed, said Caroline Greenwell, a partner at law firm Charles Russell Speechlys.
Hayes, who worked at UBS Group AG, was one of nine individuals convicted by UK authorities for manipulating rates tied to trillions of dollars of loans and securities around the world. With the public still dealing with the repercussions of the 2008 financial crisis – from austerity to job losses and a collapse in property prices – the cases became a high-profile emblem for the banker greed many blamed for what had happened.
Ex-Barclays Plc trader Carlo Palombo, who also had his conviction overturned, addressed that very point on Wednesday, saying that the rate-rigging defendants were cast as 'dishonest greedy bankers.'
'We were accused of things that didn't make sense,' he told a press conference. 'We were caught up in this Kafka-esque nightmare.'
Hayes' case was by far the most famous in the Libor scandal, but just a year after his trial, three others Barclays, Jonathan Mathew, Jay Merchant and Alex Pabon, were convicted of similar rigging charges involving the benchmark.
Another Barclays banker, Peter Johnson, had pleaded guilty in 2014 as part of the case. A string of further convictions of traders accused of rigging the Euro interbank rate followed.
The quashing of the convictions 'raises the very real spectre that all the other convictions relating' to the rate rigging cases 'are also miscarriages of justice,' Robert Newcombe, a criminal barrister, said.
Speaking after the ruling, Hayes also pushed the idea that the other bankers involved in the scandal could benefit.
'A guilty plea doesn't mean that they are guilty,' he said. 'All those convictions need to go, including those people that pled guilty off the back of the fact that they felt like they couldn't have a fair trial in this country.'
The SFO, which both prosecutes and investigates the most serious white-collar crime in Britain, had opposed Hayes' appeal the entire way through the process, maintaining the convictions were secured fairly.
It said in a statement it will 'ensure all those convicted in related cases are aware of the judgment.'
'It is a matter for them as to any steps they wish to take,' it added.
Libor had been a constant — but largely unknown — presence in financial markets before it became associated with the financial crisis. It was used to determine the price of everything from interest-rate swaps to mortgages and credit card rates.
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 across the City of London at around 11 a.m., 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.
Hayes' 2015 conviction followed a two-month London trial where he was found guilty of working with traders and brokers to game Libor.
He had been a star performer at UBS in Tokyo from 2006 until 2009, when he joined Citigroup Inc. He was dismissed by the American bank less than a year later as the Libor scandal began to widen.
In its decision Wednesday, the UK Supreme Court said the Hayes jury had been misdirected by a judge, who was wrong to say that a bank's commercial reasons couldn't play a part in a rate submission.
It also said that 'jury directions given in later cases, including at the trial of Mr. Palombo, followed in material respects those given at the trial of Mr. Hayes.' That will give other traders hope.
For the SFO, the landmark ruling is a blow to its reputation.
It's a 'sharp repudiation of the way benchmark manipulation prosecutions have been conducted over the past decade,' said David Hamilton, a partner at London law firm Howard Kennedy who's primary areas include fraud and business crime. 'This decision will reverberate across financial crime enforcement.'
--With assistance from Hillary Boye Doku.
(Updates with additional comment from Hayes. Earlier versions of this story corrected the day of the court decision and an error in a graphic.)
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