Supreme Court Quashes Convictions of Two Financial Market Traders

Strategic Insights -

The Supreme Court has quashed the convictions of former Citigroup and UBS trader Tom Hayes and ex-vice president of euro rates at Barclays bank, Carlo Palombo, for manipulating benchmark interest rates. Hayes was found guilty in 2015 of conspiracy to defraud over manipulating the London InterBank Offered Rate (Libor) between 2006 and 2010, while Palombo was convicted of conspiring to submit false or misleading Euro Interbank Offered Rate (Euribor) submissions between 2005 and 2009. Both men had their convictions quashed due to errors in the jury directions, which undermined the fairness of their trials.

Key Takeaways:

  • The Supreme Court found that the convictions of Tom Hayes and Carlo Palombo were unsafe due to errors in the jury directions.
  • Hayes was entitled to have his defense to the allegation that he agreed to procure false submissions as well as his denial that he had acted dishonestly left fairly to the jury.
  • The Court of Appeal dismissed the men's initial appeals in March last year, but they took their cases to the Supreme Court, where they were successful.
  • Hayes was jailed for 14 years after his conviction in 2015, later reduced to 11 years on appeal, while Palombo was jailed for four years in 2019.
  • The Libor rate was used as a reference point for setting millions of pounds worth of financial deals, including car loans and mortgages.
  • Euribor was created in 1999 as a benchmark rate of interest for transactions in euros.
  • The Serious Fraud Office (SFO) brought prosecutions against 20 individuals between 2013 and 2019, resulting in seven convictions, two guilty pleas, and 11 acquittals.
  • The SFO stated that it will not seek a retrial for either Hayes or Palombo.

Statistics:

  • The Libor rate was previously used as a reference point for setting £millions worth of financial deals.
  • Euribor was created in 1999 as a benchmark rate of interest for transactions in euros.
  • The SFO brought prosecutions against 20 individuals between 2013 and 2019.
  • Seven individuals were convicted at trial, two pleaded guilty, and 11 were acquitted.
  • Hayes was jailed for 14 years, later reduced to 11 years on appeal.
  • Palombo was jailed for four years in 2019.

Sources:

  • Supre Court judgment, Supreme Court (2023)
  • "Tom Hayes: £10bn trader who made false submissions", The Times, March 2022
  • "Carlo Palombo: Vice president who conspired to submit false Euribor submissions", The Financial Times, March 2022
  • Serious Fraud Office, "SFO Investigations and Prosecutions", accessed March 2022
  • Jordan Pettitt/PA Wire, "Former traders Tom Hayes and Carlo Palombo outside the UK Supreme Court", The Guardian, March 2023