Libor manipulation was 'standard practice', says Hayes

Former trader on trial for Libor manipulation believed his actions were accepted practice on the trading floor – but still tried to bury alleged 'bribes' to brokers

Tom Hayes: on trial for fraud

The former UBS and Citigroup trader accused of Libor manipulation told investigators he thought his actions were standard practice, Southwark Crown Court heard today (June 17), despite evidence of his increasing unease with his use of wash trades to pay off brokers complicit in the alleged conspiracy.

Prosecution lawyers presented the court with excerpts of interviews in 2013 between Tom Hayes and the UK's Serious Fraud Office (SFO) investigating the alleged manipulation of the London interbank offered rate (Libor) between 2006 and 2010.

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"What is an industry standard action? What is deemed to be acceptable?" Hayes told the SFO in April 2013. "People talk about Libors, whether they internally make sure Libors suit their books, it's sort of standard industry practice. It doesn't make it right, but all I'm saying is that ... amongst the trading fraternity these are considered, you know, not particularly unusual."

Hayes is accused of attempting to manipulate Libor to benefit his trading positions for personal gain, and has pleaded not guilty to eight charges of conspiracy to defraud.

The point is this stuff's going on all over the Street and you're one player in it

In the 2013 interview, Hayes was presented with and discussed some of the evidence amassed during the SFO's investigation. The records of phone calls, emails and internal Bloomberg chat messages between Hayes and the brokers he enlisted to help him allegedly rig Libor were shown to the court, alongside the former trader's responses.

"The point is this stuff's going on all over the Street and you're one player in it," Hayes told the SFO.

However, the court also saw evidence of him attempting to cover up payments to brokers to help him allegedly rig the benchmark.

Hayes would commission wash trades consisting of two mirror transactions that effectively cancelled each other out. With no risks or benefits to the financial institution involved, a wash trade's only purpose was to reward helpful brokers with a brokerage fee.

In return for the brokerage fee from the wash trades, Hayes's brokers would use their connections with other banks to attempt to influence their Libor fixing, the prosecution said.

The court heard how Hayes talked with his brokers and planned to stagger the times of the wash trades to make it less obvious they were related.

And when the subject of wash trades came up in a Bloomberg chat conversation with one broker, Hayes warned him: "Don't fucking put it on chat."

At one point the summary of Hayes's evidence from 2013 stated: "He was still concerned that compliance might question these trades, but that never happened." Hayes told the SFO: "I must have been concerned about the moral side of it ... This aspect of my whole case is what I feel most uncomfortable talking about."

The trial continues.