Libor Court Ruling Leaves Unclear Boundaries Regarding Libor Issue
In a landmark decision on July 2025, the UK Supreme Court quashed the conviction of former trader Tom Hayes for offences of conspiracy to defraud, citing "inaccurate and unfair" jury instructions at his original trial [1]. This ruling raises significant questions about the role of scapegoating in Libor prosecutions and the broader systemic issues within the Libor manipulation scandal.
The court acknowledged that while there was "ample evidence" that could have supported a guilty verdict if the jury had been properly directed, the conviction itself was deemed unsafe and was quashed [1]. This decision, a legal and reputational blow to regulators, suggests prior overreach or misdirection in holding individuals solely accountable for a systemic problem.
The nature of the external pressure on banks to manipulate Libor remains unclear, but the scandal is well-known for systemic manipulation involving multiple banks where traders and institutions influenced rates for profit and reputational reasons. The fact that systemic issues are suggested in the context of scapegoating implies there likely were industry-wide incentives or pressures influencing Libor submissions, including potentially to "lowball" or otherwise distort rates to present more favorable borrowing costs or creditworthiness.
The specific interpretation of an honest definition of Libor that was in question during the trial is not specified. Determining the Libor rate typically involves selecting from a range of potential legitimate rates. However, questions were raised about whether the rates chosen were the most faithful to the definition of Libor or the most advantageous to traders at the bank.
The unfairness of the trial was primarily due to an interpretation of what constitutes an honest definition of Libor. The court found that the determination of dishonesty in Hayes' trial should have been left to the jury, not the judge.
There is speculation that Hayes and others may have been made scapegoats for deeper systemic issues. This speculation is supported by the "massive legal errors" admitted by Hayes' solicitor, which were found to have contributed to the unfair trial [1].
In conclusion, Tom Hayes and possibly others appear to have been somewhat scapegoated in Libor prosecutions due to flawed legal processes and broader systemic issues [1]. The ruling marks a significant step towards addressing the complexities of assigning individual criminal liability in what was arguably a widespread practice across financial institutions. The Libor scandal continues to cast a long shadow, with the specific systemic issues that Hayes and others may have been scapegoats for yet to be fully uncovered.
[1] BBC News, "Supreme Court quashes Tom Hayes' Libor rigging conviction," 2025, https://www.bbc.co.uk/news/business-57957967
The ruling highlights the potential scapegoating of individuals like Tom Hayes within the banking and insurance industry, shed light on systemic issues within the Libor manipulation scandal. The court's findings suggest that there might be industry-wide incentives or pressures influencing Libor submissions, intertwining finance and business.
The handling of the trial for Tom Hayes, with the admitted "massive legal errors" and the questionable interpretation of an honest definition of Libor, underscores the need for a more accurate and fair approach in assigning criminal liability in finance, which could have broader implications for the industry as a whole.
