US drops rate-rigging charges against ex-Citi and UBS trader Tom Hayes

A New York judge has thrown out criminal charges against Tom Hayes, the former UBS and Citigroup trader who served more than five years in prison in the UK for conspiring to manipulate the Libor benchmark interest rate.

The scandal over Libor — the London Interbank Offered Rate — sent shockwaves through global financial markets more than a decade ago. Several banks were required to pay fines for rigging the benchmark in their favour.

At issue was the way the interest rate was set, based on banks’ submissions rather than actual transactions, potentially allowing traders to push the rate higher or lower and profit from the effect on derivatives contracts.

Hayes had been accused by British and US prosecutors of being a key participant in a global conspiracy to manipulate Libor, which was used to price hundreds of trillions of dollars of assets worldwide.

The decision to drop US charges against Hayes follows an appeals court ruling in a separate US case, which overturned the Libor-rigging convictions of two former Deutsche Bank traders. That ruling found the government had “failed to show that any of the trader-influenced submissions were false, fraudulent or misleading”.

Prosecutors in the Hayes case said on Thursday that the previous ruling brought into question their ability to secure a conviction. Charges against another former trader, Roger Darin, were also dismissed.

Hayes was convicted in the UK in 2015 of conspiring to rig Libor and sentenced to 14 years in prison, reduced to 11 on appeal. He was released in January last year after serving five-and-a-half years and has continued to battle against the conviction. He is awaiting a final decision from the Criminal Cases Review Commission, which investigates potential miscarriages of justice.

Hayes was told by the CCRC it had made a provisional decision not to refer his case, but will now hear further submissions from his legal team before it makes a final decision.

Although Hayes was charged in both the US and the UK, he was only tried in the UK. If a Briton is charged by UK and overseas authorities for the same alleged wrongdoing, they are not usually extradited to face the overseas charges as well.

In a statement on Monday he said: “The US Department of Justice has seen fit to dismiss charges based on the same facts, evidence and case in law that the UK courts used to justify my 11-year prison sentence. That alone should be grounds enough for these cases to be referred back to the Court of Appeal in the UK, and if need be to the Supreme Court, which is yet to hear the case.”

Hayes has argued he was made a scapegoat for his managers and the banks themselves, who he said supported his actions.

Hayes was a star derivatives trader at UBS in Tokyo from 2006 until 2009 and claimed to have made the bank more than $280mn of profits. He was poached by Citigroup with a $4.2mn joining bonus, only then to be dismissed 10 months later as the Libor scandal accelerated.

The UK Serious Fraud Office closed its probe into rate rigging in 2019. Thirteen individuals were charged for conspiracy to defraud and four were convicted.