Former UBS Trader Sues for $400M After Libor Conviction Quashed
Tom Hayes, a former trader whose conviction for manipulating interest rates was recently quashed, is suing his former employer, UBS, for $400 million in damages. In a complaint filed in the United States District Court in Connecticut, Hayes accuses the Swiss banking giant of malicious prosecution and intentional destruction of his life in what became one of the biggest financial scandals of the 2008 global crisis.
In July, Hayes had his 2015 conviction overturned by the UK Supreme Court, which ruled that his trial had been unfair. At the heart of his lawsuit is the claim that UBS “scapegoated” him during the investigation into the manipulation of the Libor rate, a key benchmark for global borrowing costs.
The Allegations: A “Scapegoat” for UBS’s Misconduct
Hayes, who was imprisoned for nearly six years, says he was unfairly targeted as the “evil mastermind” behind the alleged Libor manipulation. His lawyers argue that UBS misled U.S. authorities to protect its senior executives from accountability, framing Hayes as the sole perpetrator to avoid significant regulatory penalties.
The complaint further alleges that UBS “gained control” over the investigation, conducting a “fundamentally flawed” inquiry designed to pin the blame squarely on Hayes. The traders’ actions were initially investigated as part of a wider crackdown on financial institutions suspected of manipulating the Libor and Euribor interest rates during the global financial crisis.
UBS, which declined to comment on the case, is accused of offering Hayes “on a silver platter” to be prosecuted in both the U.S. and the UK, using misleading disclosures to ensure his conviction. Hayes’ legal team contends that the prosecution was engineered by UBS to deflect scrutiny from the bank’s role in the scandal.
The Libor Scandal: A Decade-Long Legal Battle
The Libor scandal, which first came to light in 2012, involved banks colluding to artificially inflate or deflate the Libor rate to benefit their own trading positions. The scandal rocked the financial industry, resulting in investigations and prosecutions across the U.S. and the UK.
Hayes was among 19 traders convicted for their involvement in the scandal, which is considered one of the largest cases of financial misconduct in history. He was the first banker to be jailed in connection with the manipulation of Libor, sentenced in 2015 for his role in the conspiracy.
However, the legal landscape shifted in Hayes’ favor when, after a prolonged legal battle, the UK Supreme Court ruled that the prosecution had been flawed. The judges questioned the fairness of the case, particularly the handling of the evidence and the decision-making process that led to his conviction.
Following his release in January 2021, Hayes had charges against him in the U.S. dismissed in 2022. But despite his legal victories, Hayes says his life and career were irrevocably damaged.
“My Life Was Ruined”
Speaking about the lawsuit, Hayes described the devastation the case had on his personal and professional life. “It has taken me over a decade to overturn my wrongful conviction and clear my name,” Hayes said in a statement. “My life was ruined by the bank’s actions – I lost my liberty, my marriage, missed out on my son’s childhood, and my physical and mental health suffered terribly.”
He went on to say that his career and reputation were destroyed by the actions of UBS, which he claims sought to protect itself at his expense. “UBS’s actions left me a broken man. Now, I am holding them to account.”
In his lawsuit, Hayes is seeking $400 million (£300 million) in damages, claiming that UBS’s actions were part of a concerted effort to save billions in fines by making him the scapegoat for the scandal. The filing suggests that Hayes was targeted by the bank in order to protect its executives from facing legal repercussions.
The Global Financial Crisis and the Libor Scandal
The manipulation of Libor rates became a focal point of the aftermath of the 2008 financial crisis, which saw the collapse of Lehman Brothers and triggered a global economic downturn. As banks and traders attempted to stabilize their own positions during this turbulent period, the illicit manipulation of Libor allowed them to generate profits at the expense of consumers and other financial institutions.
Libor, which stands for London Interbank Offered Rate, is a key interest rate used to set borrowing costs on a wide range of financial products, including mortgages and car loans. The scandal, which involved dozens of traders across multiple banks, raised serious questions about the integrity of the global financial system.
In the U.S., the conduct for which Hayes was originally convicted is no longer considered a crime. An appeals court ruled that the actions of traders like Hayes did not breach any specific laws, further complicating the legal landscape surrounding the case.
What’s Next for Hayes?
Now that his conviction has been quashed, Hayes is focused on seeking justice and financial compensation for the hardships he endured. His legal team hopes that the lawsuit will not only secure a substantial payout but also send a strong message to other financial institutions that may attempt to scapegoat individuals in future scandals.
Hayes has also expressed a desire to donate any potential winnings from the lawsuit to charity, with a particular focus on organizations that work to address miscarriages of justice. “I hope to win my claim and make substantial donations to charities which seek to right miscarriages of justice,” Hayes said.
As his case progresses, it is likely to attract significant attention from both the financial industry and the public, as it raises crucial questions about accountability in the wake of one of the most infamous financial scandals of the 21st century.
