Tom Hayes, Face of Libor Scandal, Sues UBS for $400 Million

In a stunning development poised to send fresh ripples through the global financial sector, Tom Hayes, the former trader who became the public face of the infamous Libor scandal, has launched a $400 million lawsuit against banking behemoth UBS. Hayes, who spent five years in prison for his role in manipulating the crucial benchmark rate, is now alleging that the Swiss bank played a significant part in his wrongful conviction and the broader circumstances that led to his downfall.

This unprecedented legal challenge emerges years after Hayes' release from a UK prison in 2021, reigniting conversations about accountability, the intricate dynamics of interbank trading, and the long shadow cast by one of finance's most notorious scandals. The suit, reportedly filed in a UK court, centers on claims that UBS, his former employer, was deeply implicated in the very activities for which he was prosecuted, and that crucial evidence was either withheld or misrepresented.

Hayes' story is, by now, well-known to industry insiders. Dubbed the "Libor villain" by some media outlets, he was the first individual to be convicted by a jury in the UK for conspiracy to defraud in relation to the manipulation of the London Interbank Offered Rate. Libor, a cornerstone of the global financial system, once underpinned trillions of dollars in loans, derivatives, and mortgages worldwide. Its daily setting, based on submissions from a panel of banks, was meant to reflect the average rate at which banks could borrow from one another.

However, during the run-up to and aftermath of the 2008 financial crisis, it became clear that this rate was being systematically manipulated by traders across multiple institutions to benefit their own trading positions. Hayes, a Yen Libor trader, was accused of orchestrating a vast network of contacts across various banks, including UBS, to influence the rate. He was handed a 14-year sentence, later reduced to 11 years on appeal, serving half before his release.

The essence of Hayes' $400 million claim against UBS reportedly hinges on two key pillars: misfeasance in public office and malicious prosecution. He contends that senior figures within the bank were aware of, and even tacitly encouraged, the practices that led to his conviction. Furthermore, he alleges that the bank cooperated with authorities in a manner that ultimately scapegoated him, withholding information that would have demonstrated a more widespread, institutional understanding and acceptance of rate-fixing.

This latest legal skirmish throws a harsh spotlight back on the period when global regulators clamped down on rate manipulation. The Libor scandal resulted in billions of dollars in fines for major banks worldwide, including UBS, which paid $1.5 billion in penalties to US, UK, and Swiss authorities in 2012. Many institutions entered into deferred prosecution agreements, admitting to wrongdoing in exchange for leniency, but individual convictions remained rare, making Hayes' case a significant outlier.

For UBS, this lawsuit represents an unwelcome dredging up of past controversies, particularly as the bank navigates its recent acquisition of Credit Suisse and strives to project an image of stability and renewed integrity. Defending against such a claim from a high-profile, convicted former employee will undoubtedly be a complex and costly affair, potentially opening the door to further scrutiny of its internal practices from over a decade ago.

Legal experts suggest that Hayes faces an uphill battle. Suing a major financial institution from a position of prior conviction presents unique challenges. However, his legal team will likely argue that new evidence or a fresh interpretation of existing facts warrants a re-evaluation of the bank's culpability and its role in his prosecution. Indeed, the very notion of a convicted individual seeking such substantial damages against a former employer on these grounds is almost unprecedented.

The outcome of this $400 million lawsuit could have far-reaching implications for both Tom Hayes and the broader banking industry. For Hayes, it's an attempt at financial and reputational redemption; for UBS, it's a test of its legal defenses and its ability to firmly close the book on a difficult chapter in its history. Whatever the resolution, this case ensures that the ghosts of the Libor scandal are far from laid to rest.