Tom Hayes, the first trader ever imprisoned for interest rate rigging, is attempting to clear his name in Britain's highest court, contending that it is not inherently dishonest to factor in commercial considerations when making Libor submissions.
Hayes, 45, formerly a prominent trader at Citigroup and UBS, was convicted in 2015 of conspiracy to defraud by manipulating Libor, a benchmark rate previously used to price trillions of dollars in financial products worldwide. The Libor rate was phased out in 2023.
During a three-day hearing at the UK Supreme Court, Hayes is joined by Carlo Palombo, 46, a former Barclays trader convicted in 2019 of manipulating Euribor, the euro equivalent of Libor.
These rates were intended to reflect banks’ short-term funding costs and were derived from daily estimates provided by a group of banks regarding their borrowing costs from each other across various currencies and periods.
Hayes and Palombo argue that their convictions were based on a definition of Libor and Euribor that assumes an absolute legal prohibition against considering a bank's commercial interests when setting rates.
The court is also being asked whether a Libor or Euribor submission must represent the lowest rate at which a bank could borrow at the time, or if it could be chosen from a range of potential borrowing rates.
Hayes’ lawyer, Adrian Darbishire, argued that the judge in his client's trial instructed the jury that a submission informed by trading advantage was, in legal terms, neither genuine nor honest. Darbishire asserted that the question of honesty should be determined by a jury rather than a judge, claiming that the judge’s direction precluded the jury from resolving crucial factual questions.
“We contend that Mr. Hayes’ conviction is unsafe,” he stated.
This Supreme Court challenge follows a significant U.S. court ruling in 2022 that overturned the Libor rigging convictions of two individuals.
Lawyers representing Hayes and Palombo maintain that Britain is unique in that it criminalizes traders for considering commercial considerations in Libor or Euribor submissions.
Hayes was initially sentenced to 14 years in prison, which was later reduced to 11 years. He was released after serving five and a half years. Palombo received a four-year sentence.