Challenging the LIBOR / EURIBOR convictions

21 Dec 2022

A decade on from the moment banker Tom Hayes learnt he was under investigation by the SFO for LIBOR manipulation, Hickman & Rose’s co-founding partner Ben Rose sets out in a blog why Tom and four other similarly-accused traders should now see their convictions quashed.


At around 7am on Monday 11 December 2012, police officers acting at the request of the Serious Fraud Office gathered outside the Surrey home of a young banker named Tom Hayes. His world was about to be tipped upside down.

The 34-year-old trader in yen derivatives would become the first and best known of a small group of City bankers charged with manipulating LIBOR (London InterBank Offered Rate). Another group would be charged with manipulating a similar benchmark rate called EURIBOR (Euro InterBank Offered Rate).

Some of these men saw the charges against them dropped. Others were acquitted at court. But Tom Hayes, Carlo Palombo, Philippe Moryoussef, Jay Merchant and Christian Bittar were convicted and sentenced to a combined total of over 34 years in jail.

Today, a decade on from Tom’s arrest, those convictions are looking increasingly open to doubt.

The English courts now stand alone in the world in treating what these men did as criminal. Most recently in the US, courts are realising that traders should not have been convicted and punished as criminals for this conduct.

But how did the LIBOR and EURIBOR prosecutions happen? How are they unravelling? And what does all this mean for those in the UK who are yet to clear their names?

What are the LIBOR / EURIBOR accused said to have done?

Historically, LIBOR was the rate published by the British Bankers Association (a commercial body) which averaged the interest rate at which certain banks were able to borrow money from one another for various periods of time in various currencies. LIBOR rates were used to set the interest rates on a wide range of financial products.

The method by which LIBOR was set at the time of the alleged offences may seem antiquated by today’s standards.

Every morning, just before 11am, the BBA asked a panel of contributor banks to provide the interest rates (for a range of currencies and lengths of time) at which they would that day be able to borrow. This often required a degree of judgement by the panel banks. At the time of the allegedly criminal submissions, there was little by way of formal rules or guidance from the BBA or the panel banks themselves as to which factors the banks were and were not allowed to take into account when making their submissions. What little material there was did not prohibit the banks from taking account of their commercial interests in the daily LIBOR rates.

The conspiracy alleged by the SFO was that traders were alleged to have impermissibly requested (of the individuals within the bank responsible for making the submissions), the submission of LIBOR rates which took into account their own institutions’ commercial interests in derivatives trades. Such commercially “tainted” submissions were a fraud, according to the SFO.

In England & Wales, the Court of Appeal in 2015 approved the decision of the trial judge in Tom Hayes’ case that taking into account a bank’s commercial interests when making a LIBOR submission was not permitted. In 2018, the Court of Appeal extended this ruling to EURIBOR too. EURIBOR was the Eurozone equivalent to LIBOR, and calculated via panel bank submissions in the same way. In that case, the Court of Appeal referred to evidence that even some of the “founding fathers” of EURIBOR were of the view that banks were not prohibited from considering their commercial interests when making submissions, so long as the rate submitted was a true rate at which one prime bank could lend to another.

After these rulings, jurors in the LIBOR/EURIBOR prosecutions were told that what traders had been doing was against the law: for some, the only issue left was whether the traders were acting dishonestly. Traders who pointed out that the whole market was doing exactly the same thing – or that those who had invented the rules in the first place had the same view – were given short shrift.

Nowadays in England & Wales, benchmark interest rate rigging is a crime under sections 91 and 92 of the Financial Services Act 2012. But this provision only came into force in April 2013. For those accused of LIBOR/EURIBOR rigging before this new law was in force the obvious question is: why was this new offence created if – as the SFO and UK courts say – it was already a crime?

The SFO’s investigation into LIBOR / EURIBOR manipulation

The investigation into LIBOR manipulation started in the US in the aftermath of the financial crisis of 2008.

In 2012, the SFO started its own investigation. Working in a political climate that was unsympathetic to ‘reckless bankers’, and in which it is fair to say the SFO was facing its own difficulties, the SFO under director David Green dedicated a huge amount of time and resources to its LIBOR investigations.

The results were mixed, though they are often touted as a famous success story. When the LIBOR investigation closed in 2019, 13 individuals had been prosecuted, of whom eight were acquitted, four found guilty and one entered a guilty plea. All those who were convicted were jailed.

The SFO commenced criminal proceedings against 11 traders for manipulating EURIBOR, of whom just four were convicted.

The cost of the investigations to the UK taxpayers is estimated to have been well over £60m.

What happened with LIBOR / EURIBOR allegations in other jurisdictions?

The approach pursued by the SFO now stands in stark contrast to the approach of courts in other jurisdictions around the world to the same rules and the same conduct.

France and Germany refused to extradite their nationals to the UK to face SFO prosecutions in relation to EURIBOR, and ruled that the conduct was not criminal in their countries. In the Netherlands, a small number of traders received regulatory censure, but none were convicted of crimes. Canada’s Competition Bureau decided in 2014 that there was insufficient evidence of criminal collusion, and dropped its investigation.

No comparable action was taken in any of the major Asian international financial centres: Tokyo, Singapore, Hong Kong.

Most dramatically, the US courts spent 2022 overturning the convictions of individuals found guilty of LIBOR rigging. This includes the convictions of traders at Deutsche Bank: Matthew Connolly, Gavin Black, Mike Curtler and Timothy Parietti. Curtler and Parietti had pleaded guilty.

Crucially, the US Court of Appeals (Second Circuit) ruled that there was insufficient evidence to establish that statements made by the bank in their case were false, fraudulent and misleading: in other words, no crime had been committed.

The UK now stands alone as the only jurisdiction in the world where any individual has been convicted of a criminal offence for LIBOR or EURIBOR manipulation.

And it isn’t just international courts that are questioning whether what took place was really criminal. Earlier this year, BBC investigative journalist Andy Verity published explosive recordings questioning whether the real crime in relation to LIBOR – lowballing (by which panel banks felt encouraged by the authorities to submit artificially low rates so as to not call into question their financial stability) – was ignored.

Articles have recently been published in the Financial Times and The Times, questioning whether reconsideration of this conduct is now needed.

What next for the LIBOR / EURIBOR convicted men?

It has long been the case that “moral panics”, such as those which followed the 2008 financial crises, lead to ill-thought through criminal justice responses. Heightened media concern, scapegoated groups, and a public feeling that “something must be done”: examples can be found throughout history and across the world from the Roman Empire, through Prohibition in the ‘20s and McCarthyism in the ‘50s.

Tell-tale signs that a prosecution is not well founded include its novelty, a distortion of existing principles, and a selective approach to evidence. We would say that all are present in the LIBOR / EURIBOR cases.

The US courts have now emerged from the other side. Proceedings in the US against Tom Hayes have been discontinued – alongside tens of others. The real question now is what is to be done here? 

At the time of writing, the Criminal Cases Review Commission (CCRC) is actively considering Tom Hayes’ case. It can only be hoped will reach a common-sense conclusion and refer it back to the Court of Appeal. Meanwhile, we will continue to pursue other ways by which the courts may be able to reconsider these convictions and allow justice to prevail.

We represent Tom Hayes*, Carlo Palombo, Philippe Moryoussef, Jay Merchant and Christian Bittar in their attempts to have their convictions quashed. We think the time has come for the UK courts to look afresh at these issues and follow the lead of their international counterparts. These traders came from around the world to work in an international financial centre in an international financial system. If the UK really is now to become the most dynamic financial services hub in the world, this parochialism cannot stand. 

Ben Rose is a founding partner of Hickman & Rose. He is working with Tom Bushnell, along with counsel Tim Owen KC, Katherine Hardcastle, Tim James-Matthews and Rosalind Comyn to challenge the convictions of these individuals. Ben Rose successfully represented Barclays trader Ryan Reich who was acquitted at trial for alleged LIBOR manipulation, and UBS trader Pete Koutsogiannis, before the FCA.

*Tom is separately represented in an application to the CCRC by Karen Todner, Adrian Darbishire KC and Tom Doble, with whom we are actively collaborating.



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