Ex-Trader: I Took the Fall for the Financial Crisis
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What is LIBOR and why was it so important to the financial system?
The barrister said to me, This
has got nothing to do with the truth, Tom. It's about who tells the best story. And I just thought, you know, this is a joke. Former trader Tom Hayes was sentenced to fourteen years in prison for manipulating one of the world's most important interest rates. He spent five and a half years in prison, but in 2025, the Supreme Court overturned his conviction.
People wanted someone to pay for the financial crisis and they wanted bankers to go to prison. So this was manna from heaven. This is like, yeah, look at these evil people.
Bankers, look what they've done. To understand Tom's story, you need to understand LIBOR. LIBOR stands for the London Interbank Offered Rate. It helped determine the price of everything, from mortgages and business loans to complex financial contracts worth trillions of dollars worldwide. Every day, major banks submitted estimates of what it will cost them to borrow money from other banks. The highest and lowest submissions were removed, and the rest were averaged to create LIBOR.
What is it that that you were accused of doing with that number?
Well, m well, basically, fundamentally we were accused of rigging or manipulating the rates. Um, and in practice what that meant was, you know, w the banks who submitted the rates the o rate that they all traded products against, we were choosing rates that were to our commercial advantage. Um so I mean my bank UBS would be asked where could you borrow three monthly in LIBOR? And my submitter, I wasn't a submitter, I was a trader. And I would might send him an email saying can you submit a high rate or can you submit a low rate? Which would basically be me saying, Look, you've got a choice of numbers, you've got five numbers, maybe you know, five Five point one, five point one two, five point one for six, five point one eight, you know, can you choose a low rate?
And he'll say, Okay, I'll choose five point one, I'll choose five point one two. Um so you're talking about differences in the submitted rate um of the hundredths of a percentage point, which when you take the averaging process actually makes a difference to the published rate in the thousandths of a percentage point. So one might say, well why why would you bother doing that? Because the these these margins are so small. But obviously the derivative sizes were large. You know, I might have a hundred thousand dollars a basis point position and the basis point is one hundredth of a percentage point. So if the publish rate moves by thousandths of a percentage point, that's worth ten thousand dollars to my book or to my bank or whatever.
Every submitter was also a trader. So axiomatically there is not like this this independent pure rate that wasn't influenced by a bank's commercial positions. And it broadly worked for 20 years because some banks would be have commercial interests where they needed a higher rate, and some and they would submit higher rates, some had where they needed a lower rate, they would submit lower rates. Obviously, the extremes were chopped out anyway. Um so the number that was spat out largely came out correct, which is why until 2008, no one ever complained about the published rates, even though we had this like conflicted system. And I was working In Japan, I didn't even breach any civil regulations in Japan.
So I wasn't sanctioned on a regulatory basis by Japan where I was working, but then I was prosecuted by two prosecutors in the US and in the UK for something that happened whilst I was working for a Swiss bank in Japan, you know, doing yen libel or yen products. I mean It was just crazy.
So we will get into that, don't worry. Um, but I just want to make sure that we're really clear on on the LIBOR and the manipulation that was happening. You were basically asking the guy within your organisation, UBS, yeah, to pick a lower rate, lose. Yeah, or lower
or higher, depending on I mean, th the thing is, is I would look at the desk position. So I would look across my desk and actually when I did the breakdown before my trial, only about fifty three percent of the time I was asking for
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Chapters
8 chapters
1
What is LIBOR and why was it so important to the financial system?
0:00–8:24
2
How did traders like Tom Hayes manipulate LIBOR rates?
8:24–17:23
3
What led to Tom Hayes being sentenced to 14 years in prison?
17:23–25:48
4
What was life like for Tom in high‑security prison and how did he cope?
25:48–35:03
5
How did the appeals process unfold and what did the Supreme Court decide in 2025?
35:03–43:24
6
What role did whistleblowers and the “low‑balling” scandal play in exposing LIBOR manipulation?
43:24–51:21
7
How did Tom’s imprisonment affect his family and personal relationships?
51:21–59:18
8
What does Tom say about ongoing ethical issues and manipulation in today’s banking industry?
59:18–1:09:57