October 29, 2025 • 29 mins
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This episode is part of my initiative to provide access to important court decisions impacting employees in an easy to understand conversational format using AI. The speakers in the episode are AI generated and frankly sound great to listen to. Enjoy!
A tiny shift in an interest rate can move oceans of money. We follow that ripple to its breaking point, tracing how Tom Hayes became the public face of LIBOR manipulation, then—years later—won full vindication in both the United States and the United Kingdom. Along the way, we unpack the documents, emails, and internal spreadsheets that allegedly turned “commercially aware” rate submissions into an institutional practice, and the crisis‑era pivot that recast one trader as the perfect fall guy.
We set the stage with a clear explanation of LIBOR’s design, why a bank’s submissions sit within a plausible range, and how that nuance became the hinge of subsequent court decisions. Then we walk through the complaint’s central claims: that UBS policy told staff to consider the bank’s trading positions, that management tracked exposures and directed desired outcomes, and that the bank later secured a non‑prosecution agreement by advancing a narrative of isolated misconduct. The result, according to the lawsuit, was a devastating chain reaction—selective disclosures, missing spreadsheets, and a jury instruction that erased the difference between choosing within a legitimate range and committing fraud.
Hayes’ convictions collapsed after the U.S. Second Circuit and the UK Supreme Court clarified that profit‑motivated choices are not criminal if the submitted rate stays within a genuine range of estimated borrowing costs. With legal ground restored, Hayes now sues UBS for malicious prosecution and indemnification, seeking at least $400 million in damages. We examine the stakes: lifetime earnings lost, health and family fallout, and the broader question of who should bear responsibility when corporate incentives steer behavior and later demand a scapegoat.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:00):
Okay, let's unpack this.
We are diving deep into what iswell arguably the most
staggering financial and legalreversal of the decade.
Tom Hayes, you know, the formerUBS trader who basically became
the global poster child for theLIBOR scandal.
He's now suing his formeremployer.
And not for a small amount.
We're talking not less than$400million.
SPEAKER_00 (00:19):
Aaron Ross Powell Yeah, and it's uh it's not just
about seeking damages, is it?
It's really like a forensic casestudy of well, institutional
betrayal.
We've been uh pouring over thesource material, primarily the
detailed court complaint, Hayesv.
UBS, and you know, related newsfilings.
And what emerges is just thismicroscopic view of how a global
bank could create a systemicpractice, profit massively from
(00:41):
it.
Right.
And then when the regulatorscame knocking, aggressively
sacrifice one, frankly,vulnerable individual to protect
its senior leadership and well,its entire franchise.
SPEAKER_01 (00:50):
So our mission today is to trace this incredible
trajectory.
I mean, how did Hayes,convicted, imprisoned in the UK,
as the evil mastermind?
How did he manage to get hisname completely cleared?
By the highest courts, no less,in both the UK and the U.S.
And uh why does he now claimthat the very conduct he was
prosecuted for was not justknown, but explicitly directed
(01:13):
by senior UBS management?
This complaint, it's just it's adevastating counter narrative to
the one the public, you know,consumed for over a decade.
SPEAKER_00 (01:21):
Aaron Ross Powell It really is.
And what's fascinating here isthat the sources they lay out
this compelling document-backedchallenge to that official
narrative.
A challenge that uh exposes thecavernous gap between UBS's
internal written policy forsetting benchmark rates and the,
let's be frank, self-servingnarrative the bank later
presented to global authorities,all to save itself from
(01:41):
potential financial ruin.
SPEAKER_01 (01:42):
Aaron Powell Okay, so section one then, setting the
stage, the player in the game.
Before we get into the wholecorporate scapegoating thing, we
really have to establish theplaying field.
For those of you who might benewer to this topic, what
exactly was LIBOR and why wastrying to influence it such a
massive deal?
SPEAKER_00 (01:55):
Aaron Ross Powell Right, LIBOR.
It stands for the London InnerBank Offered Rate.
Um to simplify its role, it wasthe world's most crucial
benchmark interest rate,essentially.
It was based on an estimate whatthe panel banks, the big banks,
believed they would pay toborrow short-term funds from
each other.
Now, crucially, this seeminglysimple estimate was the
(02:16):
reference point for contractsvalued in the trillions,
trillions of dollars globally.
Trillions.
Yeah, we're talking everythingfrom really complex financial
derivatives to you know everydaythings like mortgages and
student loans.
SPEAKER_01 (02:28):
Wow, trillions.
So the integrity of that ratewas absolutely paramount because
its movement, even by tinyfractions like basis points, it
had monumental implicationseverywhere.
Trevor Burrus, Jr.
SPEAKER_00 (02:40):
Exactly right.
The integrity was built entirelyon trust, the idea that banks
were submitting uh honestestimates of their true
borrowing costs.
And while LIBOR itself wasofficially phased out as a
standard benchmark in mid-2023,the consequences of its
manipulation back in the 2000s,they're still echoing in the
courts today, loudly.
SPEAKER_01 (02:57):
Okay, now let's look at the central figure in this
lawsuit, Tom Hayes.
He was, by all accounts, anexceptionally high-achieving
young trader, hired by UBSspecifically for his genius in
mathematics and financialmodeling, specifically for the
Yen derivatives desk in Tokyo.
And he was young, barely 26 whenhe joined in 2006.
SPEAKER_00 (03:16):
Yeah, and Hayes' profile is absolutely
fundamental to the story of whyhe became, in UBS's eyes, the
perfect fall guy.
The complaint openly discusseshis diagnosis with autism
spectrum disorder, ASD.
His cognitive profile, you know,characterized by this highly
linear, sometimes one-trackthinking, and a deep reliance on
explicit instruction, on rulefollowing.
(03:37):
It made him an incrediblyeffective trader, especially in
a rules-based environment.
Oh, it's ironically.
But ironically, it also made himvulnerable, uh, easy to isolate
when the bank decided it neededa villain.
SPEAKER_01 (03:47):
And the sources detail this truly disturbing
exclusionary workplace culturehe faced, which just reinforces
how easily he was laterisolated.
This wasn't just like standardhigh-pressure trading floor
stuff.
The complaint notes colleaguesroutinely use derogatory
nicknames, things like Rainmanand Kid Asperger's.
SPEAKER_00 (04:04):
That kind of language, it reflects a deeply
exclusionary and frankly toxicculture.
You have to wonder, right, wouldthey have tried to scapegoat him
so easily if he'd been, say, asmooth-talking, socially adept
manager type?
Probably not.
His difference, his focus onexplicit rules and structure,
the very thing that made him$300million for the bank, was later
(04:24):
weaponized against him.
Used to portray him as thissocially awkward lone wolf who
couldn't possibly be operatingunder corporate direction.
SPEAKER_01 (04:32):
Okay, so this brings us neatly to the core claim of
the lawsuit.
The direct refutation of thatlone wolf narrative.
The complaint states explicitlythat the conduct Hayes was later
imprisoned for wasn't roguebehavior at all.
It was institutional policy.
SPEAKER_00 (04:47):
That's the absolute pivot point here.
The lawsuit states very clearlythat UBS policy explicitly
required LIBOR submitters, therates traders, the CERT traders,
to consider the bank'scommercial interests,
specifically its tradingpositions when setting these
estimated rates.
And this policy wasn't hidden.
It was known, established, andformally approved by senior
managers, including SashaPrince, the global co-head of
(05:08):
rates.
SPEAKER_01 (05:08):
So wait, this wasn't just some kind of nudge-nudge
wink-wink thing.
It was an established, possiblyeven written mandate.
The bank was effectively sayingyou must look at what benefits
us financially when you makethis submission.
SPEAKER_00 (05:21):
That's precisely the allegation.
Which means the conduct he waslater prosecuted for was, at the
time he was doing it, entirelyconsistent with how UBS wanted
its traders to operate.
It wasn't rogue, it was the job.
SPEAKER_01 (05:33):
Wow.
And how did they operationalizethat?
You mentioned tools.
SPEAKER_00 (05:36):
Yes.
I can trace thisinstitutionalization right down
to the internal tools they used.
UBS maintained these highlydetailed daily internal
spreadsheets.
Think of them almost like acentral control panel for the
really critical currencies (05:48):
Euro LIBOR, USD LIBOR, GBP LIBOR.
These internal documents, whichthe complaint says were
concealed from authorities foryears, tracked the bank's
aggregated exposure across allthese different currencies.
SPEAKER_01 (06:01):
And these weren't just for reporting, like profit
and loss statements.
SPEAKER_00 (06:03):
No, no, no.
Far from it.
These spreadsheets were activelyused to instruct the rates
traders on how to influence thesubmissions.
The goal maximize UBS's profit.
SPEAKER_01 (06:12):
Can you give us a sense of how specific those
instructions were?
SPEAKER_00 (06:15):
Absolutely.
The updated internal LIBORpolicy, and this is key, it was
in place before Hayes evenjoined the firm, contained
explicit illustrativeinstructions, examples of how to
influence fixings.
The source material highlightsone specific example.
They track something called thenegative delta.
So if the Euro LIBOR calculationfor a specific term, let's say
(06:37):
three months, showed the bankwas receiving a negative delta,
meaning the current rate fixingwould cause a loss for the bank
because of its net positions.
SPEAKER_01 (06:45):
Okay.
SPEAKER_00 (06:45):
The policy explicitly detailed the required
response, what the trader shoulddo.
Which was.
They were instructed to increasethe fixing by 25 basis points to
ensure a positive outcome andincrease profit.
Now think about that for asecond.
25 basis points a quarter of 1%multiplied across trillions of
dollars in contracts.
(07:06):
That's a colossal movement ofmoney.
And it was seemingly writteninto an internal policy
document.
It shows senior managementwasn't just like vaguely aware
of the practice, they hadquantified the desired outcome.
SPEAKER_01 (07:17):
Aaron Powell So UBS senior management, particularly
in London, was deeply entrenchedin this systemic practice across
its major trading desks.
SPEAKER_00 (07:25):
Aaron Powell That's the picture the complaint
paints, yes.
Deeply entrenched.
Hashtag 1.3, Hayes' work inmanagement direction.
SPEAKER_01 (07:32):
Aaron Ross Powell Okay, now let's narrow the focus
back to Hayes himself.
In Tokyo, starting in 2006 onthe Yen derivatives desk, you
mentioned the yen market wasdistinct.
SPEAKER_00 (07:41):
Aaron Powell Yeah, it was less mature, uh less
formalized than the big euro ordollar markets.
And the yen LIBOR submissionswere primarily handled by one
senior STR trader back inLondon, a guy named Roger
Darren.
SPEAKER_01 (07:53):
Aaron Ross Powell And this is where the paper
trail, the evidence showingdirect management approval,
becomes really crucial for thelawsuit, right?
SPEAKER_00 (07:58):
Aaron Powell Undeniable, according to the
complaint.
Hayes, consistent with his ASDprofile, you know, needing
explicit direction, didn'tcommunicate his request to
influence the Unlight Warsecretly.
He did it routinely.
These communications wentdirectly to a supervisor, Mike
Peary, often daily, often inwriting, asking for help to
influence the rates to benefithis desk's positions.
SPEAKER_01 (08:19):
And the complaint alleges Peary didn't just
passively receive thisinformation, he actively
directed Hayes' actions and putpressure on the submitters.
SPEAKER_00 (08:27):
Exactly.
He exerted pressure to benefitthe Yen desk specifically, which
again removes any claim thatHayes was somehow operating
independently or outside thecorporate structure.
It was managed.
(08:50):
Yes, Christmas Day.
A senior trader on the Yen Desk,someone named Nayomichi, sent an
email directing Hayes to ensurelower LIBOR submissions for a
specific rate.
And crucially, that email wascopied directly to Pierre,
Hayes' supervisor.
SPEAKER_01 (09:04):
On Christmas Day?
SPEAKER_00 (09:04):
On Christmas Day.
That's an explicit instructionto manipulate the benchmark for
the bank's profit received andacknowledged by Hayes' manager
on a major holiday.
It shows the urgency and, well,the accepted nature of the
practice.
SPEAKER_01 (09:16):
Aaron Powell Okay, let's talk about the money.
Because that often feels likethe ultimate proof of corporate
approval, doesn't it?
Over three years, Hayesgenerated approximately$300
million in profit for UBS.
That kind of performance.
It doesn't go unnoticed.
SPEAKER_00 (09:31):
Aaron Powell Far from it.
And when Hayes startedattracting offers from rivals,
specifically Goldman Sachs, whoapparently offered him a
staggering$5 million upfrontbonus senior management at UBS
went into damage control, theyneeded him to stay.
And their internal justificationfor retaining him is pure gold
for this lawsuit.
SPEAKER_01 (09:49):
Aaron Powell They offered him a massive retention
bonus themselves, right?
$2.5 million.
SPEAKER_00 (09:54):
Well, they only ended up paying him$250,000 of
it before the scandal broke,which is, you know, a
significant piece of financialbetrayal in its own right.
But the internal communicationabout why they needed him,
that's the real evidence here.
SPEAKER_01 (10:06):
What did it say?
Aaron Ross Powell, Jr.
SPEAKER_00 (10:07):
The internal email from Pierre, his supervisor, to
Yvonne Der Crow, who was aglobal co-head of rates trading.
This is pretty damning.
Pierre explicitly listed Hayes'strong connections to LIBOR
setters in London as informationthat was invaluable for the
derivatives books and strategicfor the firm.
SPEAKER_01 (10:24):
Wow.
Invaluable.
SPEAKER_00 (10:25):
Invaluable.
That's direct, written proofthat management was aware of the
mechanism, the connections heused to influence submissions,
and they explicitly valued andrewarded that mechanism.
They were effectively rewardingthe very conduct they later told
the DOJ and SFO was criminal androgue.
SPEAKER_01 (10:42):
So management wasn't just passively aware of his high
profit margins.
They understood how he achievedthem, deemed it invaluable, and
put a multi-million dollar pricetag on keeping that mechanism
inside UBS.
SPEAKER_00 (10:53):
Aaron Powell That's precisely the argument.
They knew, they valued it, theypaid for it, or at least they
offered to pay for it.
SPEAKER_01 (10:58):
Okay, so we've established that up to say 2008,
UBS was fully aware, implicitlyapproving, and handsomely
profiting from these systemicpractices.
Practices codifying their owninternal rules, potentially,
that the 2008 financial crisishits.
And the music stops.
This marks the beginning of thegreat corporate pivot, doesn't
it?
SPEAKER_00 (11:17):
Aaron Powell Oh, absolutely.
The world changed overnight.
After the crisis, the globalregulatory environment became
incredibly aggressive, hardenedsignificantly.
Authorities, especially the U.S.
Department of Justice, the DOJ,and the UK's serious fraud
office, the SFO, launched thesemassive multi-year
investigations into widespreadLIBOR manipulation across the
(11:39):
industry.
Suddenly, UBS faced existentialruin, potentially including the
loss of its crucial US dollarclearing license, which, you
know, would cripple its globaloperations.
SPEAKER_01 (11:51):
So cooperation wasn't really optional anymore.
It was survival.
But cooperation meant takingresponsibility, and UBS wasn't
willing to let its seniormanagement or maybe its entire
franchise take the fall for whatwas essentially historical
corporate practice.
SPEAKER_00 (12:04):
Aaron Powell That seems to be the core of the
argument, yes.
They pivoted abruptly, fromdefending their policy or at
least tolerating it tocondemning it, and more
importantly, finding apalatable, high-profile villain,
someone to offer up.
SPEAKER_01 (12:16):
And how did they choose that villain?
SPEAKER_00 (12:18):
Well, the sources indicate UBS needed a very
specific type of figure.
Someone non-management, ideallydistant from the Zurich
headquarters, and uh crucially,someone who no longer worked for
the bank.
Tom Hayes, with his distinctprofile, his distance in Tokyo,
and his recent resignation, hefit the bill perfectly.
He was the ideal, politicallyexpendable figure, the perfect
(12:40):
fall guy.
SPEAKER_01 (12:41):
And the lawsuit alleges that the internal
investigation they conducted,the one led by outside counsel
Gibson Dunn, it wasn't a genuinesearch for truth.
SPEAKER_00 (12:50):
The claim is it was what we might call investigation
theater.
The goal was predefined.
Justify Hayes' eventualprosecution and pin all the
significant issues exclusivelyon him.
And this is where the systematicdeception allegedly began.
UBS had to conceal the truthabout their bank wide policy,
the one that factored commercialinterests into submissions.
SPEAKER_01 (13:09):
Aaron Powell What specific information did they
allegedly withhold, things thatwould have helped Hayes?
SPEAKER_00 (13:13):
According to the complaint, the most critical
documents were those LIBORspreadsheets we talked about
earlier.
Those documents provedsystematic manipulation across
USD, Euro, and GBP fixings,showing the issue wasn't just
confined to Hayes' relativelysmall yen desk in Tokyo.
It was much bigger.
The complaint says UBS hid thesedocuments.
(13:35):
They also selectively disclosedinformation, ensuring the
regulatory spotlight wasdiverted away from senior
executives who had approved theunderlying policies, people like
Karsten Kenghetter, SashaPrince, Yvonne Ducrow.
SPEAKER_01 (13:47):
So the narrative they presented to prosecutors
was effectively a fabrication.
Hayes is the evil mastermind.
SPEAKER_00 (13:53):
The evil mastermind, the lone wolf, acting improperly
and independently.
That was the story.
Despite their own internalevidence apparently showing his
actions were directed by hismanager, Pierre, and were
consistent with established UBSpractice at the time.
SPEAKER_01 (14:06):
And the sources quote that phrase, evil
mastermind.
SPEAKER_00 (14:09):
They do.
The bank's internal description,allegedly used when dealing with
authorities, it wasinstrumental.
By setting Hayes up as thesingular villain, UBS
successfully minimized the rolesof their senior leadership and
created the necessary conditionsto essentially facilitate his
prosecution in both the US andthe UK, all to secure their own
leniency.
(14:29):
Hashtag tag hashtag 2.3, thenon-prosecution agreement, NPA.
SPEAKER_01 (14:34):
And this whole strategy, it culminates in
December 2012, right?
UBS enters into this sweepingnon-prosecution agreement with
the DOJ.
Meanwhile, UBS Japan pleadsguilty to wire fraud in
Connecticut.
This was the massive quid proquo, wasn't it?
Leniency and protection for theparent company, UBS AG, and its
senior management in exchangefor cooperation.
SPEAKER_00 (14:54):
Exactly.
And the key documentunderpinning that deal is the
statement of facts.
It was Exhibit 8 to theagreement.
This document became theofficial sanitized history of
the scandal, at least as UBSpresented it.
And the complaint argues itdrastically misrepresented the
scope of the misconduct,presented it as merely
occasional and episodic actsconfined mostly to that less
formalized yen market in Japan.
SPEAKER_01 (15:14):
Aaron Powell So portraying the systemic issue as
just isolated bad behavior by afew traders like Hayes.
SPEAKER_00 (15:21):
Aaron Powell Pretty much.
Despite, again, allegedly havinginternal documents proving
systemic manipulation across allmajor currencies, originating
from London and elsewhere.
SPEAKER_01 (15:30):
Aaron Powell And that false official narrative,
it was carefully designed toprotect the people at the very
top, wasn't it?
SPEAKER_00 (15:36):
No, absolutely.
The statement of facts,according to the analysis and
the source material, wasmeticulously crafted to shield
the highest levels of the bank.
While it might have mentionedsenior manager awareness in
certain footnotes, it includedcrucial but subtle legal
language.
It explicitly defined thosegeneralized terms like manager
and senior manager as notincluding members of the
(15:58):
executive board or the board ofdirectors.
Pure sleight of hand, arguably.
Designed to minimize the scopeof the conspiracy, ensure
accountability stopped far belowthe C-suite.
SPEAKER_01 (16:08):
And the timing of this whole maneuver is just
critical.
The announcement of the NPA, thedeal that protected the bank and
its leadership, coincidedprecisely with Tom Hayes' arrest
in the UK on December 11, 2012.
He was the criminal scalpauthorities needed to justify
the massive deal they struckwith UBS.
SPEAKER_00 (16:25):
The timing certainly confirms the connection, doesn't
it?
The bank provided theauthorities with their villain.
This ensured the narrativefocused on individual
criminality, not institutionalfailure, which secured their
corporate freedom, albeit at thecost of huge fines.
SPEAKER_01 (16:39):
Okay, so the bank is protected, the narrative is set,
and Tom Hayes is now facingsimultaneous prosecution in two
major jurisdictions.
What evidence did UBS continueto withhold even after the NPA?
How did that prejudice hisdefense?
SPEAKER_00 (16:53):
Well, the lawsuit claims that even after securing
the MPA, UBS continued itsstrategy of obfuscation, of
hiding key evidence.
They failed to disclose crucial,potentially exculpatory
evidence, like those bank wideLIBOR spreadsheets we keep
mentioning.
They demonstrated systematicmanipulation across all
currencies, not just yen.
They also allegedly failed toprovide comprehensive PL
(17:15):
statements, profit and loss.
These would have shown Hayes'limited personal gain compared
to the bank's massive profitsfrom the overall activity.
Withholding that kind ofinformation severely crippled
Hayes' ability to defend himselfby proving he was just acting
under bank policy.
SPEAKER_01 (17:30):
And this leads us to the critical error in the UK
trial in 2015, the trial whereHayes was convicted.
It all hinged on a specificinstruction given to the jury by
the judge, Justice Cook.
SPEAKER_00 (17:40):
Yes, this is absolutely the crux of the
judicial error, the error thatdestroyed Hayes' life for years,
but also ultimately led to hisvindication.
Justice Cook improperlyinstructed the jury, according
to the later Supreme Courtruling.
He told them that considering abank's commercial interests,
meaning factoring in theirtrading positions when
submitting a LIBOR estimate wasnecessarily wrongful, that it
(18:03):
automatically constituted aconspiracy to defraud.
SPEAKER_01 (18:06):
But wait, Hayes' entire defense was that his
conduct was exactly that,consistent with a UBS policy,
consistent with long-standingindustry practice, taught and
condoned by senior management.
SPEAKER_00 (18:18):
Precisely.
SPEAKER_01 (18:19):
So by making commercial interest inherently
criminal, the judge essentiallyjust removed Hayes' entire
defense from the jury'sconsideration.
SPEAKER_00 (18:26):
That's effectively what happened.
Yes.
The judge's instructionessentially told the jury ignore
the systemic context, ignore thebank policy arguments, focus
solely on the fact that Hayesintended to influence the rate
to benefit the bank's positions.
By defining that intent alone ascriminal, it pretty much
prejudged the case, madeconviction almost inevitable.
Hashtag 3.2.
(18:46):
The ruin of a life.
SPEAKER_01 (18:48):
And the consequences of this wrongful conviction were
just absolute devastation forhim, weren't they?
Hayes served over five years inprison, including time in high
security facilities, sharingcells with violent offenders,
suffering multiple assaults.
SPEAKER_00 (19:02):
Yeah, the detail in the complaint about the ruin of
his life is genuinely difficultto read.
It's harrowing.
He didn't just lose his liberty,he lost his entire standing in
the world.
He was permanently branded bymajor media outlets as the
global face of financial crime.
Because of all the negativepress and the charges, he was
debanked, kicked out by majorfinancial institutions like JP
(19:24):
Morgan Chase, couldn't even havea bank account.
His assets were frozen.
He was forced to sell his familyhome simply to cover his defense
costs, which, as the complaintstates, exceeded$1 million.
SPEAKER_01 (19:35):
And beyond the financial ruin, there's the
physical and emotional toll,this institutional betrayal.
The sources note the extremestress of this wrongful
prosecution caused severemental, emotional, and physical
trauma, including tragically,the manifestation of multiple
sclerosis, MS, during his UKtrial.
SPEAKER_00 (19:51):
It's devastating.
And think about the lostpotential.
He was on a career trajectoryback in 2010 that likely would
have seen him earning, you know,five to ten million dollars a
year for decades.
Given the path of high-levelWall Street pay, instead, he
lost hundreds of millions inpotential lifetime earnings.
And beyond that, the immensestrain fractured his personal
life.
He and his wife separated in2019, divorced in 2022.
(20:13):
The consequences were justtotal.
Hashtags tag tags tag 3.3,exoneration and legal precedent.
SPEAKER_01 (20:19):
But the long road towards vindication finally
started to yield results yearslater.
It began really in January 2022.
The U.S.
Second Circuit Court of Appealsreversed the conviction of
another banker, MatthewConnolly, and that set a crucial
legal precedent.
SPEAKER_00 (20:33):
That precedent was huge.
It fundamentally undermined theprosecution's core argument in
these LIBOR cases.
The Second Circuit found noreasonable dosis to believe that
merely considering treatingpositions and LIBOR submissions
constituted illegal wire fraud,assuming the rate submitted was
still within a range ofplausible borrowing costs.
(20:53):
This was the first majorjudicial blow against that
simplistic commercial interestis automatically criminal
argument that had underpinnedHayes' conviction.
SPEAKER_01 (21:02):
And following that precedent, the USDOJ was
basically forced to act.
SPEAKER_00 (21:07):
They were.
They formally dismissed thecriminal case against Hayes in
October 2022, acknowledging thatthere was simply no basis to
continue the prosecution inlight of the Second Circuit's
ruling on Connolly, one down.
Trevor Burrus, Jr.
SPEAKER_01 (21:18):
But the really complete legal clearance came
much more recently, July 2025.
The UK Supreme Court quashedHayes' conviction entirely.
They confirmed that JusticeCook, the trial judge, had
fundamentally misunderstood andmisstated the law.
His instruction to the jury waswrong.
SPEAKER_00 (21:34):
Yes, comprehensively wrong.
SPEAKER_01 (21:36):
Can you elaborate just a bit more on the precise
legal distinction the SupremeCourt made?
Because this feels like theabsolute key to the whole thing.
SPEAKER_00 (21:43):
It really is.
The Supreme Court rulingvalidated Hayes' core defense,
the one he tried to make back in2015.
It established that while a bankcould not submit a rate that was
completely divorced fromreality, pure fiction, it could
legitimately submit a rate thatfell within an acceptable range
of its estimated borrowingcosts.
And this is crucial, even if thebank chose a rate within that
(22:06):
legitimate range, specificallybecause it maximized its
commercial interests andprofits.
The key was the existence of agenuine range of acceptable,
non-manipulated potential costs.
SPEAKER_01 (22:18):
So Justice Cook's instruction was wrong because it
eliminated that legitimate rangeentirely.
SPEAKER_00 (22:23):
Exactly.
By deeming any consideration ofcommercial interest as
automatically criminal, itcompletely whiled out the
possibility of operatinglegitimately within that range.
It made conviction inevitable ifany commercial thought was
present.
SPEAKER_01 (22:35):
Aaron Powell So, in effect, the UK Supreme Court
declared that the very act Hayeswas imprisoned for operating
within what he argued was aninstitutional mandate to choose
a profitable rate within agenuine range was not, in fact,
criminal under English law.
SPEAKER_00 (22:49):
Correct.
And significantly, the UKauthorities acknowledged they
would not seek a retrial,finally closing the criminal
chapter after 13 long years oflegal battles.
Vindication.
SPEAKER_01 (23:00):
So after complete exoneration in both the U.S.
and the UK, we arrive at thepresent moment.
The filing of this lawsuit inOctober 2025, Hayes is now
seeking financial redress fromUBS for what he powerfully
describes in the complaint astheir shameful, wrong, and
morally unconscionable actions.
SPEAKER_00 (23:18):
Yes, and the complaint centers on two very
specific legal counts.
Count one is the really powerfulclaim of malicious prosecution.
Hayes alleges that UBS didn'tjust cooperate passively with
authorities.
They actively initiated andperpetuated the criminal
proceedings against him.
How?
By intentionally providing falseand misleading information to
prosecutors.
SPEAKER_01 (23:37):
And the motive, according to lawsuit, was purely
self-preservation for UBS.
SPEAKER_00 (23:41):
Entirely, the suit alleges.
UBS's intent was to limit itsown massive potential civil,
criminal, and regulatoryliability, and critically, to
protect its senior management,the ones who had arguably
approved the systemic practicesin the first place.
SPEAKER_01 (23:55):
Aaron Powell So the lawsuit argues UBS knew it had
no probable cause, no real basisto believe Hayes would be
successfully prosecuted foractual crimes based on their own
internal documents.
SPEAKER_00 (24:06):
Aaron Powell That's the core of the malicious
prosecution claim.
That UBS knew their internaldocuments proved his actions
were policy compliant or atleast directed by management.
So by fabricating the lone wolfstory, by withholding the
crucial spreadsheets andmanagement emails showing
approval, they activelymaliciously created the
conditions for his prosecution.
SPEAKER_01 (24:26):
Okay, and count too.
That's the claim forindemnification.
SPEAKER_00 (24:29):
Yes, this is rooted in basic agency law.
Hayes argues that he acted as anagent for UBS.
His LIBOR-related conduct, whichremember, generated$300 million
in profit for the bank, wasclearly within the scope of his
employment, and it wasundertaken entirely for the
purpose of benefiting UBS.
SPEAKER_01 (24:45):
So, because the bank benefited directly and
explicitly approved his actionsat the managerial level.
SPEAKER_00 (24:51):
Hayes claims UBS is legally obligated to reimburse
him, to indemnify him for thesubstantial legal expenses he
incurred, defending himselfagainst the consequences of
actions that were effectivelybank policy.
He's seeking repayment for that$1 million plus defense cost he
had to bear personally.
SPEAKER_01 (25:07):
Right.
Let's talk about the damagessought.
They are truly staggering, notless than$400 million, plus
exemplary damages and legalcosts.
How does Hayes's claim evenarrive at such a monumental
figure?
SPEAKER_00 (25:18):
Well, the$400 million figure, it's a
calculation based primarily onlost potential lifetime
earnings.
But it also clearly aims toencompass the severe trauma and
suffering inflicted over morethan a decade.
As we discussed, a trader of hiscaliber, especially in that
derivatives market, particularlyafter the 2010 financial surge,
he was realistically on track topotentially earn conservatively
(25:41):
over$200 million across severaldecades, maybe much more.
But the lawsuit isn't justseeking compensation for lost
income, it's for the completedestruction of his professional
future, coupled with theprofound emotional and physical
injury, including the MSdiagnosis allegedly caused by
the prosecution orchestrated byhis former employer.
SPEAKER_01 (25:59):
It's just it's a powerful final chapter to this
whole saga, isn't it?
Yeah.
The very conduct that wasseemingly celebrated and
rewarded internally, the abilityto leverage strong connections,
influence rates, secure hundredsof millions in profit, was
retroactively redefined asillegal.
And then dumbed squarely ontothe shoulders of the person
deemed most easily sacrificed.
SPEAKER_00 (26:18):
Yeah.
So if we try to connect this tothe bigger picture, this case
really forces a profoundreevaluation of the entire LIBOR
investigation narrative, doesn'tit?
The ultimate legal reversal bythe UK Supreme Court confirms
that the conduct UBS presentedto regulators as evil and
criminal was in fact potentiallyinstitutionalized and directed.
(26:39):
The focus shifts decisively andmaybe permanently from
individual traitor misconduct tosystematic corporate practice,
and crucially, alleged corporatedeception during the
investigation.
SPEAKER_01 (26:51):
It really raises a critical question, I think,
about the dynamics betweenimmense corporate power and
regulatory compliance.
When these massive corporateentities choose
self-preservation throughcooperation with regulators, and
that cooperation demonstrablyseems to require the deliberate
fabrication of a narrative topin blame on an individual, an
individual who might have justbeen following internal policy.
How often does the system end uprewarding corporate deception?
(27:13):
And how do we truly measure thecost of that institutional
betrayal on an individual'slife?
I mean, UBS effectivelypurchased corporate leniency
with$1.5 billion in fines andfive years of Tom Hayes'
freedom.
SPEAKER_00 (27:25):
Aaron Powell And what's just fascinating here,
going back to the sourcematerial, is the claim that
UBS's internal policy requiredtraders to factor in profit when
setting LIBOR rates.
So if a global financial system,or at least a major player
within it, mandatesself-interest, if it defines
standard practice as maximizingprofit by submitting a rate at
the high or low end of asupposedly acceptable range,
(27:48):
where does the ethical line andthe legal line between that
standard practice and aconspiracy to defraud truly lie?
And maybe more importantly, whois ultimately responsible for
defining that line?
Is it the bank, the regulators,the courts?
SPEAKER_01 (28:00):
That's definitely something for you, our
listeners, to mull over as thisunprecedented$400 million
lawsuit unfolds.
A huge case to watch.
Okay, let's unpack this.
We are diving deep into what iswell arguably the most
staggering financial and legalreversal of the decade.
Tom Hayes, you know, the formerUBS trader who basically became
the global poster child for theLIBOR scandal.
He's now suing his formeremployer.
And not for a small amount.
We're talking not less than$400million.
SPEAKER_00 (00:19):
Aaron Ross Powell Yeah, and it's uh it's not just
about seeking damages, is it?
It's really like a forensic casestudy of well, institutional
betrayal.
We've been uh pouring over thesource material, primarily the
detailed court complaint, Hayesv.
UBS, and you know, related newsfilings.
And what emerges is just thismicroscopic view of how a global
bank could create a systemicpractice, profit massively from
(00:41):
it.
Right.
And then when the regulatorscame knocking, aggressively
sacrifice one, frankly,vulnerable individual to protect
its senior leadership and well,its entire franchise.
SPEAKER_01 (00:50):
So our mission today is to trace this incredible
trajectory.
I mean, how did Hayes,convicted, imprisoned in the UK,
as the evil mastermind?
How did he manage to get hisname completely cleared?
By the highest courts, no less,in both the UK and the U.S.
And uh why does he now claimthat the very conduct he was
prosecuted for was not justknown, but explicitly directed
(01:13):
by senior UBS management?
This complaint, it's just it's adevastating counter narrative to
the one the public, you know,consumed for over a decade.
SPEAKER_00 (01:21):
Aaron Ross Powell It really is.
And what's fascinating here isthat the sources they lay out
this compelling document-backedchallenge to that official
narrative.
A challenge that uh exposes thecavernous gap between UBS's
internal written policy forsetting benchmark rates and the,
let's be frank, self-servingnarrative the bank later
presented to global authorities,all to save itself from
(01:41):
potential financial ruin.
SPEAKER_01 (01:42):
Aaron Powell Okay, so section one then, setting the
stage, the player in the game.
Before we get into the wholecorporate scapegoating thing, we
really have to establish theplaying field.
For those of you who might benewer to this topic, what
exactly was LIBOR and why wastrying to influence it such a
massive deal?
SPEAKER_00 (01:55):
Aaron Ross Powell Right, LIBOR.
It stands for the London InnerBank Offered Rate.
Um to simplify its role, it wasthe world's most crucial
benchmark interest rate,essentially.
It was based on an estimate whatthe panel banks, the big banks,
believed they would pay toborrow short-term funds from
each other.
Now, crucially, this seeminglysimple estimate was the
(02:16):
reference point for contractsvalued in the trillions,
trillions of dollars globally.
Trillions.
Yeah, we're talking everythingfrom really complex financial
derivatives to you know everydaythings like mortgages and
student loans.
SPEAKER_01 (02:28):
Wow, trillions.
So the integrity of that ratewas absolutely paramount because
its movement, even by tinyfractions like basis points, it
had monumental implicationseverywhere.
Trevor Burrus, Jr.
SPEAKER_00 (02:40):
Exactly right.
The integrity was built entirelyon trust, the idea that banks
were submitting uh honestestimates of their true
borrowing costs.
And while LIBOR itself wasofficially phased out as a
standard benchmark in mid-2023,the consequences of its
manipulation back in the 2000s,they're still echoing in the
courts today, loudly.
SPEAKER_01 (02:57):
Okay, now let's look at the central figure in this
lawsuit, Tom Hayes.
He was, by all accounts, anexceptionally high-achieving
young trader, hired by UBSspecifically for his genius in
mathematics and financialmodeling, specifically for the
Yen derivatives desk in Tokyo.
And he was young, barely 26 whenhe joined in 2006.
SPEAKER_00 (03:16):
Yeah, and Hayes' profile is absolutely
fundamental to the story of whyhe became, in UBS's eyes, the
perfect fall guy.
The complaint openly discusseshis diagnosis with autism
spectrum disorder, ASD.
His cognitive profile, you know,characterized by this highly
linear, sometimes one-trackthinking, and a deep reliance on
explicit instruction, on rulefollowing.
(03:37):
It made him an incrediblyeffective trader, especially in
a rules-based environment.
Oh, it's ironically.
But ironically, it also made himvulnerable, uh, easy to isolate
when the bank decided it neededa villain.
SPEAKER_01 (03:47):
And the sources detail this truly disturbing
exclusionary workplace culturehe faced, which just reinforces
how easily he was laterisolated.
This wasn't just like standardhigh-pressure trading floor
stuff.
The complaint notes colleaguesroutinely use derogatory
nicknames, things like Rainmanand Kid Asperger's.
SPEAKER_00 (04:04):
That kind of language, it reflects a deeply
exclusionary and frankly toxicculture.
You have to wonder, right, wouldthey have tried to scapegoat him
so easily if he'd been, say, asmooth-talking, socially adept
manager type?
Probably not.
His difference, his focus onexplicit rules and structure,
the very thing that made him$300million for the bank, was later
(04:24):
weaponized against him.
Used to portray him as thissocially awkward lone wolf who
couldn't possibly be operatingunder corporate direction.
SPEAKER_01 (04:32):
Okay, so this brings us neatly to the core claim of
the lawsuit.
The direct refutation of thatlone wolf narrative.
The complaint states explicitlythat the conduct Hayes was later
imprisoned for wasn't roguebehavior at all.
It was institutional policy.
SPEAKER_00 (04:47):
That's the absolute pivot point here.
The lawsuit states very clearlythat UBS policy explicitly
required LIBOR submitters, therates traders, the CERT traders,
to consider the bank'scommercial interests,
specifically its tradingpositions when setting these
estimated rates.
And this policy wasn't hidden.
It was known, established, andformally approved by senior
managers, including SashaPrince, the global co-head of
(05:08):
rates.
SPEAKER_01 (05:08):
So wait, this wasn't just some kind of nudge-nudge
wink-wink thing.
It was an established, possiblyeven written mandate.
The bank was effectively sayingyou must look at what benefits
us financially when you makethis submission.
SPEAKER_00 (05:21):
That's precisely the allegation.
Which means the conduct he waslater prosecuted for was, at the
time he was doing it, entirelyconsistent with how UBS wanted
its traders to operate.
It wasn't rogue, it was the job.
SPEAKER_01 (05:33):
Wow.
And how did they operationalizethat?
You mentioned tools.
SPEAKER_00 (05:36):
Yes.
I can trace thisinstitutionalization right down
to the internal tools they used.
UBS maintained these highlydetailed daily internal
spreadsheets.
Think of them almost like acentral control panel for the
really critical currencies (05:48):
Euro LIBOR, USD LIBOR, GBP LIBOR.
These internal documents, whichthe complaint says were
concealed from authorities foryears, tracked the bank's
aggregated exposure across allthese different currencies.
SPEAKER_01 (06:01):
And these weren't just for reporting, like profit
and loss statements.
SPEAKER_00 (06:03):
No, no, no.
Far from it.
These spreadsheets were activelyused to instruct the rates
traders on how to influence thesubmissions.
The goal maximize UBS's profit.
SPEAKER_01 (06:12):
Can you give us a sense of how specific those
instructions were?
SPEAKER_00 (06:15):
Absolutely.
The updated internal LIBORpolicy, and this is key, it was
in place before Hayes evenjoined the firm, contained
explicit illustrativeinstructions, examples of how to
influence fixings.
The source material highlightsone specific example.
They track something called thenegative delta.
So if the Euro LIBOR calculationfor a specific term, let's say
(06:37):
three months, showed the bankwas receiving a negative delta,
meaning the current rate fixingwould cause a loss for the bank
because of its net positions.
SPEAKER_01 (06:45):
Okay.
SPEAKER_00 (06:45):
The policy explicitly detailed the required
response, what the trader shoulddo.
Which was.
They were instructed to increasethe fixing by 25 basis points to
ensure a positive outcome andincrease profit.
Now think about that for asecond.
25 basis points a quarter of 1%multiplied across trillions of
dollars in contracts.
(07:06):
That's a colossal movement ofmoney.
And it was seemingly writteninto an internal policy
document.
It shows senior managementwasn't just like vaguely aware
of the practice, they hadquantified the desired outcome.
SPEAKER_01 (07:17):
Aaron Powell So UBS senior management, particularly
in London, was deeply entrenchedin this systemic practice across
its major trading desks.
SPEAKER_00 (07:25):
Aaron Powell That's the picture the complaint
paints, yes.
Deeply entrenched.
Hashtag 1.3, Hayes' work inmanagement direction.
SPEAKER_01 (07:32):
Aaron Ross Powell Okay, now let's narrow the focus
back to Hayes himself.
In Tokyo, starting in 2006 onthe Yen derivatives desk, you
mentioned the yen market wasdistinct.
SPEAKER_00 (07:41):
Aaron Powell Yeah, it was less mature, uh less
formalized than the big euro ordollar markets.
And the yen LIBOR submissionswere primarily handled by one
senior STR trader back inLondon, a guy named Roger
Darren.
SPEAKER_01 (07:53):
Aaron Ross Powell And this is where the paper
trail, the evidence showingdirect management approval,
becomes really crucial for thelawsuit, right?
SPEAKER_00 (07:58):
Aaron Powell Undeniable, according to the
complaint.
Hayes, consistent with his ASDprofile, you know, needing
explicit direction, didn'tcommunicate his request to
influence the Unlight Warsecretly.
He did it routinely.
These communications wentdirectly to a supervisor, Mike
Peary, often daily, often inwriting, asking for help to
influence the rates to benefithis desk's positions.
SPEAKER_01 (08:19):
And the complaint alleges Peary didn't just
passively receive thisinformation, he actively
directed Hayes' actions and putpressure on the submitters.
SPEAKER_00 (08:27):
Exactly.
He exerted pressure to benefitthe Yen desk specifically, which
again removes any claim thatHayes was somehow operating
independently or outside thecorporate structure.
It was managed.
(08:50):
Yes, Christmas Day.
A senior trader on the Yen Desk,someone named Nayomichi, sent an
email directing Hayes to ensurelower LIBOR submissions for a
specific rate.
And crucially, that email wascopied directly to Pierre,
Hayes' supervisor.
SPEAKER_01 (09:04):
On Christmas Day?
SPEAKER_00 (09:04):
On Christmas Day.
That's an explicit instructionto manipulate the benchmark for
the bank's profit received andacknowledged by Hayes' manager
on a major holiday.
It shows the urgency and, well,the accepted nature of the
practice.
SPEAKER_01 (09:16):
Aaron Powell Okay, let's talk about the money.
Because that often feels likethe ultimate proof of corporate
approval, doesn't it?
Over three years, Hayesgenerated approximately$300
million in profit for UBS.
That kind of performance.
It doesn't go unnoticed.
SPEAKER_00 (09:31):
Aaron Powell Far from it.
And when Hayes startedattracting offers from rivals,
specifically Goldman Sachs, whoapparently offered him a
staggering$5 million upfrontbonus senior management at UBS
went into damage control, theyneeded him to stay.
And their internal justificationfor retaining him is pure gold
for this lawsuit.
SPEAKER_01 (09:49):
Aaron Powell They offered him a massive retention
bonus themselves, right?
$2.5 million.
SPEAKER_00 (09:54):
Well, they only ended up paying him$250,000 of
it before the scandal broke,which is, you know, a
significant piece of financialbetrayal in its own right.
But the internal communicationabout why they needed him,
that's the real evidence here.
SPEAKER_01 (10:06):
What did it say?
Aaron Ross Powell, Jr.
SPEAKER_00 (10:07):
The internal email from Pierre, his supervisor, to
Yvonne Der Crow, who was aglobal co-head of rates trading.
This is pretty damning.
Pierre explicitly listed Hayes'strong connections to LIBOR
setters in London as informationthat was invaluable for the
derivatives books and strategicfor the firm.
SPEAKER_01 (10:24):
Wow.
Invaluable.
SPEAKER_00 (10:25):
Invaluable.
That's direct, written proofthat management was aware of the
mechanism, the connections heused to influence submissions,
and they explicitly valued andrewarded that mechanism.
They were effectively rewardingthe very conduct they later told
the DOJ and SFO was criminal androgue.
SPEAKER_01 (10:42):
So management wasn't just passively aware of his high
profit margins.
They understood how he achievedthem, deemed it invaluable, and
put a multi-million dollar pricetag on keeping that mechanism
inside UBS.
SPEAKER_00 (10:53):
Aaron Powell That's precisely the argument.
They knew, they valued it, theypaid for it, or at least they
offered to pay for it.
SPEAKER_01 (10:58):
Okay, so we've established that up to say 2008,
UBS was fully aware, implicitlyapproving, and handsomely
profiting from these systemicpractices.
Practices codifying their owninternal rules, potentially,
that the 2008 financial crisishits.
And the music stops.
This marks the beginning of thegreat corporate pivot, doesn't
it?
SPEAKER_00 (11:17):
Aaron Powell Oh, absolutely.
The world changed overnight.
After the crisis, the globalregulatory environment became
incredibly aggressive, hardenedsignificantly.
Authorities, especially the U.S.
Department of Justice, the DOJ,and the UK's serious fraud
office, the SFO, launched thesemassive multi-year
investigations into widespreadLIBOR manipulation across the
(11:39):
industry.
Suddenly, UBS faced existentialruin, potentially including the
loss of its crucial US dollarclearing license, which, you
know, would cripple its globaloperations.
SPEAKER_01 (11:51):
So cooperation wasn't really optional anymore.
It was survival.
But cooperation meant takingresponsibility, and UBS wasn't
willing to let its seniormanagement or maybe its entire
franchise take the fall for whatwas essentially historical
corporate practice.
SPEAKER_00 (12:04):
Aaron Powell That seems to be the core of the
argument, yes.
They pivoted abruptly, fromdefending their policy or at
least tolerating it tocondemning it, and more
importantly, finding apalatable, high-profile villain,
someone to offer up.
SPEAKER_01 (12:16):
And how did they choose that villain?
SPEAKER_00 (12:18):
Well, the sources indicate UBS needed a very
specific type of figure.
Someone non-management, ideallydistant from the Zurich
headquarters, and uh crucially,someone who no longer worked for
the bank.
Tom Hayes, with his distinctprofile, his distance in Tokyo,
and his recent resignation, hefit the bill perfectly.
He was the ideal, politicallyexpendable figure, the perfect
(12:40):
fall guy.
SPEAKER_01 (12:41):
And the lawsuit alleges that the internal
investigation they conducted,the one led by outside counsel
Gibson Dunn, it wasn't a genuinesearch for truth.
SPEAKER_00 (12:50):
The claim is it was what we might call investigation
theater.
The goal was predefined.
Justify Hayes' eventualprosecution and pin all the
significant issues exclusivelyon him.
And this is where the systematicdeception allegedly began.
UBS had to conceal the truthabout their bank wide policy,
the one that factored commercialinterests into submissions.
SPEAKER_01 (13:09):
Aaron Powell What specific information did they
allegedly withhold, things thatwould have helped Hayes?
SPEAKER_00 (13:13):
According to the complaint, the most critical
documents were those LIBORspreadsheets we talked about
earlier.
Those documents provedsystematic manipulation across
USD, Euro, and GBP fixings,showing the issue wasn't just
confined to Hayes' relativelysmall yen desk in Tokyo.
It was much bigger.
The complaint says UBS hid thesedocuments.
(13:35):
They also selectively disclosedinformation, ensuring the
regulatory spotlight wasdiverted away from senior
executives who had approved theunderlying policies, people like
Karsten Kenghetter, SashaPrince, Yvonne Ducrow.
SPEAKER_01 (13:47):
So the narrative they presented to prosecutors
was effectively a fabrication.
Hayes is the evil mastermind.
SPEAKER_00 (13:53):
The evil mastermind, the lone wolf, acting improperly
and independently.
That was the story.
Despite their own internalevidence apparently showing his
actions were directed by hismanager, Pierre, and were
consistent with established UBSpractice at the time.
SPEAKER_01 (14:06):
And the sources quote that phrase, evil
mastermind.
SPEAKER_00 (14:09):
They do.
The bank's internal description,allegedly used when dealing with
authorities, it wasinstrumental.
By setting Hayes up as thesingular villain, UBS
successfully minimized the rolesof their senior leadership and
created the necessary conditionsto essentially facilitate his
prosecution in both the US andthe UK, all to secure their own
leniency.
(14:29):
Hashtag tag hashtag 2.3, thenon-prosecution agreement, NPA.
SPEAKER_01 (14:34):
And this whole strategy, it culminates in
December 2012, right?
UBS enters into this sweepingnon-prosecution agreement with
the DOJ.
Meanwhile, UBS Japan pleadsguilty to wire fraud in
Connecticut.
This was the massive quid proquo, wasn't it?
Leniency and protection for theparent company, UBS AG, and its
senior management in exchangefor cooperation.
SPEAKER_00 (14:54):
Exactly.
And the key documentunderpinning that deal is the
statement of facts.
It was Exhibit 8 to theagreement.
This document became theofficial sanitized history of
the scandal, at least as UBSpresented it.
And the complaint argues itdrastically misrepresented the
scope of the misconduct,presented it as merely
occasional and episodic actsconfined mostly to that less
formalized yen market in Japan.
SPEAKER_01 (15:14):
Aaron Powell So portraying the systemic issue as
just isolated bad behavior by afew traders like Hayes.
SPEAKER_00 (15:21):
Aaron Powell Pretty much.
Despite, again, allegedly havinginternal documents proving
systemic manipulation across allmajor currencies, originating
from London and elsewhere.
SPEAKER_01 (15:30):
Aaron Powell And that false official narrative,
it was carefully designed toprotect the people at the very
top, wasn't it?
SPEAKER_00 (15:36):
No, absolutely.
The statement of facts,according to the analysis and
the source material, wasmeticulously crafted to shield
the highest levels of the bank.
While it might have mentionedsenior manager awareness in
certain footnotes, it includedcrucial but subtle legal
language.
It explicitly defined thosegeneralized terms like manager
and senior manager as notincluding members of the
(15:58):
executive board or the board ofdirectors.
Pure sleight of hand, arguably.
Designed to minimize the scopeof the conspiracy, ensure
accountability stopped far belowthe C-suite.
SPEAKER_01 (16:08):
And the timing of this whole maneuver is just
critical.
The announcement of the NPA, thedeal that protected the bank and
its leadership, coincidedprecisely with Tom Hayes' arrest
in the UK on December 11, 2012.
He was the criminal scalpauthorities needed to justify
the massive deal they struckwith UBS.
SPEAKER_00 (16:25):
The timing certainly confirms the connection, doesn't
it?
The bank provided theauthorities with their villain.
This ensured the narrativefocused on individual
criminality, not institutionalfailure, which secured their
corporate freedom, albeit at thecost of huge fines.
SPEAKER_01 (16:39):
Okay, so the bank is protected, the narrative is set,
and Tom Hayes is now facingsimultaneous prosecution in two
major jurisdictions.
What evidence did UBS continueto withhold even after the NPA?
How did that prejudice hisdefense?
SPEAKER_00 (16:53):
Well, the lawsuit claims that even after securing
the MPA, UBS continued itsstrategy of obfuscation, of
hiding key evidence.
They failed to disclose crucial,potentially exculpatory
evidence, like those bank wideLIBOR spreadsheets we keep
mentioning.
They demonstrated systematicmanipulation across all
currencies, not just yen.
They also allegedly failed toprovide comprehensive PL
(17:15):
statements, profit and loss.
These would have shown Hayes'limited personal gain compared
to the bank's massive profitsfrom the overall activity.
Withholding that kind ofinformation severely crippled
Hayes' ability to defend himselfby proving he was just acting
under bank policy.
SPEAKER_01 (17:30):
And this leads us to the critical error in the UK
trial in 2015, the trial whereHayes was convicted.
It all hinged on a specificinstruction given to the jury by
the judge, Justice Cook.
SPEAKER_00 (17:40):
Yes, this is absolutely the crux of the
judicial error, the error thatdestroyed Hayes' life for years,
but also ultimately led to hisvindication.
Justice Cook improperlyinstructed the jury, according
to the later Supreme Courtruling.
He told them that considering abank's commercial interests,
meaning factoring in theirtrading positions when
submitting a LIBOR estimate wasnecessarily wrongful, that it
(18:03):
automatically constituted aconspiracy to defraud.
SPEAKER_01 (18:06):
But wait, Hayes' entire defense was that his
conduct was exactly that,consistent with a UBS policy,
consistent with long-standingindustry practice, taught and
condoned by senior management.
SPEAKER_00 (18:18):
Precisely.
SPEAKER_01 (18:19):
So by making commercial interest inherently
criminal, the judge essentiallyjust removed Hayes' entire
defense from the jury'sconsideration.
SPEAKER_00 (18:26):
That's effectively what happened.
Yes.
The judge's instructionessentially told the jury ignore
the systemic context, ignore thebank policy arguments, focus
solely on the fact that Hayesintended to influence the rate
to benefit the bank's positions.
By defining that intent alone ascriminal, it pretty much
prejudged the case, madeconviction almost inevitable.
Hashtag 3.2.
(18:46):
The ruin of a life.
SPEAKER_01 (18:48):
And the consequences of this wrongful conviction were
just absolute devastation forhim, weren't they?
Hayes served over five years inprison, including time in high
security facilities, sharingcells with violent offenders,
suffering multiple assaults.
SPEAKER_00 (19:02):
Yeah, the detail in the complaint about the ruin of
his life is genuinely difficultto read.
It's harrowing.
He didn't just lose his liberty,he lost his entire standing in
the world.
He was permanently branded bymajor media outlets as the
global face of financial crime.
Because of all the negativepress and the charges, he was
debanked, kicked out by majorfinancial institutions like JP
(19:24):
Morgan Chase, couldn't even havea bank account.
His assets were frozen.
He was forced to sell his familyhome simply to cover his defense
costs, which, as the complaintstates, exceeded$1 million.
SPEAKER_01 (19:35):
And beyond the financial ruin, there's the
physical and emotional toll,this institutional betrayal.
The sources note the extremestress of this wrongful
prosecution caused severemental, emotional, and physical
trauma, including tragically,the manifestation of multiple
sclerosis, MS, during his UKtrial.
SPEAKER_00 (19:51):
It's devastating.
And think about the lostpotential.
He was on a career trajectoryback in 2010 that likely would
have seen him earning, you know,five to ten million dollars a
year for decades.
Given the path of high-levelWall Street pay, instead, he
lost hundreds of millions inpotential lifetime earnings.
And beyond that, the immensestrain fractured his personal
life.
He and his wife separated in2019, divorced in 2022.
(20:13):
The consequences were justtotal.
Hashtags tag tags tag 3.3,exoneration and legal precedent.
SPEAKER_01 (20:19):
But the long road towards vindication finally
started to yield results yearslater.
It began really in January 2022.
The U.S.
Second Circuit Court of Appealsreversed the conviction of
another banker, MatthewConnolly, and that set a crucial
legal precedent.
SPEAKER_00 (20:33):
That precedent was huge.
It fundamentally undermined theprosecution's core argument in
these LIBOR cases.
The Second Circuit found noreasonable dosis to believe that
merely considering treatingpositions and LIBOR submissions
constituted illegal wire fraud,assuming the rate submitted was
still within a range ofplausible borrowing costs.
(20:53):
This was the first majorjudicial blow against that
simplistic commercial interestis automatically criminal
argument that had underpinnedHayes' conviction.
SPEAKER_01 (21:02):
And following that precedent, the USDOJ was
basically forced to act.
SPEAKER_00 (21:07):
They were.
They formally dismissed thecriminal case against Hayes in
October 2022, acknowledging thatthere was simply no basis to
continue the prosecution inlight of the Second Circuit's
ruling on Connolly, one down.
Trevor Burrus, Jr.
SPEAKER_01 (21:18):
But the really complete legal clearance came
much more recently, July 2025.
The UK Supreme Court quashedHayes' conviction entirely.
They confirmed that JusticeCook, the trial judge, had
fundamentally misunderstood andmisstated the law.
His instruction to the jury waswrong.
SPEAKER_00 (21:34):
Yes, comprehensively wrong.
SPEAKER_01 (21:36):
Can you elaborate just a bit more on the precise
legal distinction the SupremeCourt made?
Because this feels like theabsolute key to the whole thing.
SPEAKER_00 (21:43):
It really is.
The Supreme Court rulingvalidated Hayes' core defense,
the one he tried to make back in2015.
It established that while a bankcould not submit a rate that was
completely divorced fromreality, pure fiction, it could
legitimately submit a rate thatfell within an acceptable range
of its estimated borrowingcosts.
And this is crucial, even if thebank chose a rate within that
(22:06):
legitimate range, specificallybecause it maximized its
commercial interests andprofits.
The key was the existence of agenuine range of acceptable,
non-manipulated potential costs.
SPEAKER_01 (22:18):
So Justice Cook's instruction was wrong because it
eliminated that legitimate rangeentirely.
SPEAKER_00 (22:23):
Exactly.
By deeming any consideration ofcommercial interest as
automatically criminal, itcompletely whiled out the
possibility of operatinglegitimately within that range.
It made conviction inevitable ifany commercial thought was
present.
SPEAKER_01 (22:35):
Aaron Powell So, in effect, the UK Supreme Court
declared that the very act Hayeswas imprisoned for operating
within what he argued was aninstitutional mandate to choose
a profitable rate within agenuine range was not, in fact,
criminal under English law.
SPEAKER_00 (22:49):
Correct.
And significantly, the UKauthorities acknowledged they
would not seek a retrial,finally closing the criminal
chapter after 13 long years oflegal battles.
Vindication.
SPEAKER_01 (23:00):
So after complete exoneration in both the U.S.
and the UK, we arrive at thepresent moment.
The filing of this lawsuit inOctober 2025, Hayes is now
seeking financial redress fromUBS for what he powerfully
describes in the complaint astheir shameful, wrong, and
morally unconscionable actions.
SPEAKER_00 (23:18):
Yes, and the complaint centers on two very
specific legal counts.
Count one is the really powerfulclaim of malicious prosecution.
Hayes alleges that UBS didn'tjust cooperate passively with
authorities.
They actively initiated andperpetuated the criminal
proceedings against him.
How?
By intentionally providing falseand misleading information to
prosecutors.
SPEAKER_01 (23:37):
And the motive, according to lawsuit, was purely
self-preservation for UBS.
SPEAKER_00 (23:41):
Entirely, the suit alleges.
UBS's intent was to limit itsown massive potential civil,
criminal, and regulatoryliability, and critically, to
protect its senior management,the ones who had arguably
approved the systemic practicesin the first place.
SPEAKER_01 (23:55):
Aaron Powell So the lawsuit argues UBS knew it had
no probable cause, no real basisto believe Hayes would be
successfully prosecuted foractual crimes based on their own
internal documents.
SPEAKER_00 (24:06):
Aaron Powell That's the core of the malicious
prosecution claim.
That UBS knew their internaldocuments proved his actions
were policy compliant or atleast directed by management.
So by fabricating the lone wolfstory, by withholding the
crucial spreadsheets andmanagement emails showing
approval, they activelymaliciously created the
conditions for his prosecution.
SPEAKER_01 (24:26):
Okay, and count too.
That's the claim forindemnification.
SPEAKER_00 (24:29):
Yes, this is rooted in basic agency law.
Hayes argues that he acted as anagent for UBS.
His LIBOR-related conduct, whichremember, generated$300 million
in profit for the bank, wasclearly within the scope of his
employment, and it wasundertaken entirely for the
purpose of benefiting UBS.
SPEAKER_01 (24:45):
So, because the bank benefited directly and
explicitly approved his actionsat the managerial level.
SPEAKER_00 (24:51):
Hayes claims UBS is legally obligated to reimburse
him, to indemnify him for thesubstantial legal expenses he
incurred, defending himselfagainst the consequences of
actions that were effectivelybank policy.
He's seeking repayment for that$1 million plus defense cost he
had to bear personally.
SPEAKER_01 (25:07):
Right.
Let's talk about the damagessought.
They are truly staggering, notless than$400 million, plus
exemplary damages and legalcosts.
How does Hayes's claim evenarrive at such a monumental
figure?
SPEAKER_00 (25:18):
Well, the$400 million figure, it's a
calculation based primarily onlost potential lifetime
earnings.
But it also clearly aims toencompass the severe trauma and
suffering inflicted over morethan a decade.
As we discussed, a trader of hiscaliber, especially in that
derivatives market, particularlyafter the 2010 financial surge,
he was realistically on track topotentially earn conservatively
(25:41):
over$200 million across severaldecades, maybe much more.
But the lawsuit isn't justseeking compensation for lost
income, it's for the completedestruction of his professional
future, coupled with theprofound emotional and physical
injury, including the MSdiagnosis allegedly caused by
the prosecution orchestrated byhis former employer.
SPEAKER_01 (25:59):
It's just it's a powerful final chapter to this
whole saga, isn't it?
Yeah.
The very conduct that wasseemingly celebrated and
rewarded internally, the abilityto leverage strong connections,
influence rates, secure hundredsof millions in profit, was
retroactively redefined asillegal.
And then dumbed squarely ontothe shoulders of the person
deemed most easily sacrificed.
SPEAKER_00 (26:18):
Yeah.
So if we try to connect this tothe bigger picture, this case
really forces a profoundreevaluation of the entire LIBOR
investigation narrative, doesn'tit?
The ultimate legal reversal bythe UK Supreme Court confirms
that the conduct UBS presentedto regulators as evil and
criminal was in fact potentiallyinstitutionalized and directed.
(26:39):
The focus shifts decisively andmaybe permanently from
individual traitor misconduct tosystematic corporate practice,
and crucially, alleged corporatedeception during the
investigation.
SPEAKER_01 (26:51):
It really raises a critical question, I think,
about the dynamics betweenimmense corporate power and
regulatory compliance.
When these massive corporateentities choose
self-preservation throughcooperation with regulators, and
that cooperation demonstrablyseems to require the deliberate
fabrication of a narrative topin blame on an individual, an
individual who might have justbeen following internal policy.
How often does the system end uprewarding corporate deception?
(27:13):
And how do we truly measure thecost of that institutional
betrayal on an individual'slife?
I mean, UBS effectivelypurchased corporate leniency
with$1.5 billion in fines andfive years of Tom Hayes'
freedom.
SPEAKER_00 (27:25):
Aaron Powell And what's just fascinating here,
going back to the sourcematerial, is the claim that
UBS's internal policy requiredtraders to factor in profit when
setting LIBOR rates.
So if a global financial system,or at least a major player
within it, mandatesself-interest, if it defines
standard practice as maximizingprofit by submitting a rate at
the high or low end of asupposedly acceptable range,
(27:48):
where does the ethical line andthe legal line between that
standard practice and aconspiracy to defraud truly lie?
And maybe more importantly, whois ultimately responsible for
defining that line?
Is it the bank, the regulators,the courts?
SPEAKER_01 (28:00):
That's definitely something for you, our
listeners, to mull over as thisunprecedented$400 million
lawsuit unfolds.
A huge case to watch.
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