UK Serious Fraud Office closes investigation into LIBOR rigging

The UK Serious Fraud Office (SFO) today announced the closure of its investigation into LIBOR manipulation. The SFO said that there will be no further charges brought in this case.

The SFO’s investigation into LIBOR manipulation has seen charges of conspiracy to defraud brought against 13 individuals. In October 2014, Peter Johnson pleaded guilty to manipulating the US Dollar LIBOR, the first criminal conviction for a LIBOR offence in the UK. Jonathan Matthew, Jay Merchant and Alex Pabon were convicted by a jury of the same charges in July 2016. In August 2015, Tom Hayes was convicted on eight counts of conspiracy to defraud in relation the manipulation of Japanese Yen LIBOR.

Between January 2016 and April 2017, six individuals were acquitted by jury of manipulating Yen LIBOR and two acquitted of manipulating US Dollar LIBOR.

All strands of the SFO’s investigation into LIBOR manipulation are now closed.

The SFO’s approach to investigating LIBOR rigging has come under fire. Thus, in June 2017, Lord James of Blackheath starkly criticized the way UK regulators and authoritative bodies handled LIBOR-related issues.

Lord James noted the sequence of four LIBOR cases which have passed through the High Court over the preceding 18 months. There have been 15 prosecutions, five convictions, two cases where the juries have failed to agree and eight acquittals. As a result, he said, there are “so many confusions and unresolved issues from this process and our parallel LIBOR market in Europe, called Euribor, is complaining so much that it may seek to shut us out and take the entire market, to our significant financial detriment.”

Tom Hayes, a former derivatives trader at UBS and Citigroup in Tokyo, was arrested in Surrey on December 11, 2012 by officers from the SFO and City of London Police in connection with an SFO investigation into the manipulation of in Japanese Yen LIBOR. Lord James reminded the fellow Lords that back in the days the Financial Conduct Authority convened an expert committee, which examined the situation and said that the senior executive to whom Mr Hayes had had to report his fixings on a daily basis had behaved correctly. It said that there was no question of his disqualification and all accusations were discarded.

The FCA then sent a copy of its report of the proceedings to the SFO, asking that it be placed in the hands of the defence counsel for the trial against Mr Hayes. Three weeks into the trial, it was found that the SFO had never released the report, and it was never seen again. The judge refused to allow it to be submitted as late evidence and the jury accordingly convicted. Mr Hayes got a prison sentence and a fine.

Lord James also slams the SFO over the “experts” it provided with regards to LIBOR-related trials. He notes that the expert witness provided by the SFO had broken down in the fourth trial, and had confessed that “he did not know the first thing about LIBOR, had never worked a day in the LIBOR market and had been given coaching by the SFO as to what to say to convince the jury”.