City traders have rate-rigging convictions quashed

Two former City traders who were at the centre of one of the biggest scandals of the financial crisis have had their convictions quashed following a 10-year fight.

Tom Hayes and Carlo Palombo were jailed following trials for manipulating the interest rates used for loans between banks.

They were among 19 City traders convicted in the US and UK for manipulating so-called Libor and Euribor interest rates, which are used to set borrowing costs on a range of loans such as mortgages and car finance deals.

Following the ruling on Wednesday, Mr Hayes said the conviction had “destroyed” his family and that it felt “surreal” to be cleared.

The Supreme Court’s judgement represents a vindication for the traders who have said for 10 years that they were victims of a series of miscarriages of justice.

They argued they were wrongly prosecuted for what were normal commercial practices in order to appease public anger towards the banks over the financial crisis.

After a decade-long battle to clear their names, the Supreme Court ruled the criminal trials of Mr Hayes and Mr Palombo were unfair and overturned their convictions.

Speaking outside court, Mr Hayes said the decision had been “a long time coming” after his “cruel and pernicious” sentence. He spent five and a half years in jail.

“It destroyed my family, [I] missed most of my son’s childhood,” he said, adding that it also led to the end of his marriage.

“For so long I’ve been an international fugitive…and now I can move on with my life, or try to.”

Asked if he would seek compensation, he told the BBC’s World at One that he would seek further legal advice.

“No amount of money gives you back that time, and actually no amount of money would make me feel better about that time,” he said.

Mr Palombo said it had been “a crazy experience”.

“I don’t even know how I feel right now,” he said. “It’s a mixture of relief, happiness.”

The Serious Fraud Office, which brought the original case against the traders, said it would not seek a retrial.

Mr Hayes and Mr Palombo were among a group of traders and brokers prosecuted for rigging interest rates in nine criminal trials in London and New York between 2015 and 2019.

Mr Hayes, a former trader at Swiss bank UBS, was the first banker jailed over the scandal in 2015.

Originally sentenced to 15 years in prison, he reduced it to 11 years on appeal and was later released in January 2021.

Mr Palombo was sentenced to four years in jail in 2019. He was also released in 2021.

• Libor, or the London interbank offered rate, was a key interest rate used to set borrowing costs for trillions of dollars worth of financial deals
• It became the focus of allegations of wrongdoing following the financial crisis in 2008
• Dozens of City traders were accused of trying to manipulate what level Libor was set at, to help the banks they worked for
• Libor was phased out after 2021

The Libor scandal came to light in 2012, when it was discovered that banks were artificially inflating rates to profit from trading and were also lowering them to mask the troubles they faced following the outbreak of the global financial crisis.

The financial crisis began in 2008 and led to the collapse of US investment bank Lehman Brothers. which sent shockwaves through the global financial system, triggering recessions across many countries.

The BBC uncovered evidence of a much larger, state-led “rigging” of interest rates, under pressure from central banks and governments across the world during the financial crisis.

Evidence implicating Downing Street and the Bank of England was suppressed throughout the criminal trials.

In 2022, US courts said there was no evidence traders had broken any laws or rules and all the American convictions were quashed – leaving the UK the only country in the world where what they were accused of was criminalised.

In the UK, the traders’ cases had been blocked from reaching the Supreme Court by the Court of Appeal five times between 2015 and 2019.

Lord Leggatt, one of five justices reviewing the case, said jury direction errors made during the trials of the former bankers made the convictions “unsafe” and therefore could not stand.

“That misdirection undermined the fairness of the trial,” he added.

However, the court also said there had been “ample evidence” for a jury to reasonably conclude Hayes had conspired with others to manipulate submissions used to compile the Libor rate.

Conservative MP Sir David Davis said the judicial system needed a “shake-up” following Wednesday’s judgement.

“This scapegoating exercise happened as a result of collusion between the banks and government agencies,” he said.

In a statement, the Serious Fraud Office (SFO) acknowledged the judgement and said it had “determined it would not be in the public interest for us to seek a retrial”.

Mr Hayes’ solicitor, Karen Todner, called for a full public inquiry into the convictions, and for the justice system to be reformed.

“Tom has missed out on formative years with his son, time with his family, and the loss of his career and his home,” she said. “Time he will never get back”.

She added: “There are no winners here.”

Now the Supreme Court has exonerated Mr Hayes and Mr Palombo, the remaining traders convicted of so-called interest rate “rigging” could also apply to have their convictions quashed.

Elizabeth Robertson, a lawyer for one of the other convicted traders until 2016, said the ruling could even call into question the convictions of those who pleaded guilty.

“I think the judgement says enough for those that pleaded guilty to have their convictions quashed as well,” she said.

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