Trader guilty of Libor rate rigging

Hayes: "The guy everyone was going to blame". Keystone

British authorities convicted a former UBS trader, Tom Hayes, on Monday, with having fraudulently manipulated Libor interbank rates, representing the first time a person is sentenced in a scandal which already cost banks billions of dollars in fines.

Hayes, who was employed at UBS in Tokyo, before taking a job briefly at Citigroup, was convicted by Britain’s Serious Fraud Office (SFO) on eight counts of conspiracy for manipulating the rate. A judge sentenced him to 14 years in jail.

During the trial, Hayes was portrayed as the ringleader of an international team of brokers who schemed to manipulate the benchmark that acts as the basis for setting financial products such as mortgage rates and loans, worth $350 trillion (CHF338 trillion).

Mukul Chawla, for the prosecution, told the jury: “No one suggests…that Mr Hayes should bear the full weight of Libor manipulation on his shoulders.”

But he emphasised the important role Hayes played, leaving a trail of 2,000 emails and computer messages. “In relation to these events, his actions stood apart from and above all of the others”.

‘Extra edge’

The former yen derivatives trader explained that his actions allowed him to enhance the profitability of his trading positions. He said he wanted to gain an “extra edge”, and that his bosses had endorsed his methods.

Hayes claimed he was made a scapegoat in the case. “UBS had thrown me under the bus. I was up against two $50 billion organisations (UBS and Citi), the DOJ (Department of Justice), the FSA (Britain’s then financial regulator) – you name the acronym. I was the guy everyone was going to blame.”

No senior executives have been prosecuted in the scandal, which cost some of the world’s biggest banks more than $9 billion in fines and have involved the charging of 21 people. Four people have pleaded guilty in separate Libor cases in Britain and the United States.

UBS, where Hayes worked from 2006-2009, was fined $1.5 billion by authorities in the US, Britain and Switzerland.

The bank commented in an official statement that it was not party to the case. “It was a matter between the SFO and Mr. Hayes”, it said. “The bank has resolved this legacy matter with most authorities.”

Meanwhile Citigroup declined to comment on the verdict.

The verdict comes at the close of a nine-week trial and an investigation which began eight years ago.