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SFO wins ‘significant victory’ in landmark Libor case as trader Hayes found guilty

In a fillip for the Serious Fraud Office (SFO), the first person to go on trial after a global investigation into interest rate manipulation scandal, Tom Hayes, has been found guilty at Southwark Crown Court and convicted on eight counts of conspiracy to defraud.

Hayes, a former UBS and Citigroup yen derivatives trader, was found guilty of manipulating the London Interbank Offered Rate (Libor). Having been dubbed the ringmaster of a cartel of traders that made millions from rigging financial markets by prosecutors, Hayes argued he was transparent about attempting to influence rates and management were aware. But today (3 August) a jury rejected his defence at Southwark Crown Court in south London and he was sentenced to 14 years in prison.

As part of the SFO’s investigation into Libor rigging, Hayes was initially charged with the offences in June 2013 alongside two others and subsequently went on trial in January this year.

A major victory for the under-fire agency, it is an archetype of the kind of complex cases that the watchdog’s director David Green QC is pushing the agency towards. Typical opinion among City lawyers is strongly divided on whether the SFO has the skills and resources to humble major banks and its continued existence was called into question at the end of last year by Home Secretary Theresa May.

Wilmer Cutler Pickering Hale and Dorr litigation partner Stephen Pollard, who is currently representing a number of individuals in both the Libor and Forex investigations, told Legal Business: ‘This outcome is a very significant victory for the SFO… it will embolden the organisation in respect of both its other Libor trials and its current case load going forward.’

In his sentencing remarks, Mr Justice Cooke said: ‘The seriousness of this offence in the context of the Libor benchmark and banking is hard to overstate. High standards of probity are to be expected of those who operate in the banking system, whether they are bankers involved in dealing with deposits and the lending of money or traders in an investment banking context. What this case has shown is the absence of that integrity which ought to characterise banking.’

He added: ‘You succumbed to the temptation, as a regulated trader, in an unregulated activity, because you could, to seek to skew Yen LIBOR submissions with a view to changing the published rate from what it otherwise would be, in order to gain an advantage for your bank’s trading profit, with the concomitant benefits which would come to you as the result of trading success, in the shape of status, seniority and remuneration, particularly by way of bonus.’

Serving as chief prosecutor on the case was 9-12 Bell Yard’s Mukul Chawla QC, who is currently instructed by the SFO to advise on any criminal conduct arising out of Libor manipulation and to prosecute cases arising out of the investigations.