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 mortgages and commercial loans. Mr Hayes said it felt “surreal” to be cleared, adding that the conviction had “destroyed” his family.
The ruling 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. The Supreme Court ruled that the 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.”
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 case, 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.
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.
Now the Supreme Court has exonerated Mr Hayes and Mr Palombo, the remaining traders convicted of so-called interest rate “rigging” will also apply to have their convictions quashed. In a statement, the Serious Fraud Office (SFO) acknowledged the judgement, which determined the directions given to the jury at the end of Mr Hayes and Mr Palombo’s trials were incorrect, meaning their convictions were found to be unsafe.
“We have considered this judgment and the full circumstances carefully and determined it would not be in the public interest for us to seek a retrial,” it said. The decision comes 13 years after the SFO began investigating the practice of some traders to try to influence benchmark interest rates through Euribor and now-discontinued Libor.
Libor, or the London interbank lending 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.
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