for explanation,

for similar functions LieBOR

THE UNBELIEVABLE STORY OF AN AWKWARD MATHS 1) Tom Hayes (Trader) -10.12 GENIUS, A GANG OF BACKSTABBING 2) Tom's Brokers (Cabal) -66.69 BANKERS, AND THE 3) David Enrich (Author) 21.03 JOURNALIST WHO UNCOVERED ONE OF THE GREATEST SCAMS EVER TRIED IN 4) The Libor rigging scandal (Global Crisis) -176.12 FINANCIAL HISTORY

Words by Joseph Bullmore

The trader at the centre of the scandal: Asperger's sufferer Tom Hayes, currently serving an 11-year term in jail

GENTLEMAN’S JOURNAL FEATURES 77 he Libor is the most important number in the world. It’s also probably the they didn’t raise suspicions harems of escorts – and often all five in com- THE How they did it... THE most boring. A single figure that underpins modern capitalism, the Libor (or SCAM among their managers, while EXCESS bination. Some stories were too salacious to T London Interbank Offered Rate) is the theoretical rate at which banks will their managers would invariably Trader 1: make the final edit. ‘This one broker – he lend to each other – the price, essentially, of borrowed money. The magazine you turn a blind eye in the face of ‘What's the call called himself Danny the Animal – was brag- hold in your hands at this very moment is drenched in Libor – it soaks through the ‘The thing about Tom is he’s very literal – no healthy profit spikes. (‘Where on the Libor?’ ‘At a certain point during my in- ging about how he’d stocked a boat in the credit card you used to pay for it, the price of printing ink, the mortgage overheads sense of sarcasm or subtlety,’ Enrich tells me. did that come from?’ a manager vestigation I was handed a hand- Mediterranean with a hoard of prostitutes of WH Smith, and the groaning student loans of its writers. But bring the number ‘So when he put everything on the table, he at brokerage firm Tullett Prebon Trader 2: ful of thumbdrives,’ Enrich tells from Marrakech. Back in London, they were ‘Where would up at your next dinner party and see just how long it takes for you to be shown did it without a filter.’ In their meetings asked his team of an unexpected me. ‘They were filled with 10,000 boasting about the escorts; apparently Danny you like it, Libor politely to the door. Nobody cares about the Libor… and that’s exactly why it be- (which usually took place in a café on the £35,000 commission. ‘You don’t that is?’ or 20,000 pieces of data – from had paid them a dollar each to let all the men came so powerful. mezzanine level of Waterloo station), Hayes want to know,’ was the response.) audio recordings of phone calls shit on their chests. ‘When I was first asked to look into the Libor case, I rolled my eyes,’ says David would unspool the story of his career onto But Hayes soon began to Trader 1: to transcripts of instant messen- ‘Everything was bigger and more degraded Enrich, the author of The Spider Network, a new book on the scandal. ‘It seemed like Enrich, all the while crimping a succession of stretch the practice to its break- ‘Mixed feelings, ger conversations and email than what I’d expected to hear,’ says Enrich; a black hole – a waste of time.’ That was in the autumn of 2012. Earlier that year, the plastic coffee stirrers into origami-like forms. ing point. Enrich details in his but mostly I'd logs.’ Enrich had been a the transcripts make The Wolf of Wall Street FSA (Financial Services Authority, the regulatory body in charge of the UK’s bank- Hayes’ mathematical brilliance had rendered book how, in June 2009, Hayes like it all lower financial journalist for years, and look sheepish by comparison. ‘But it was just so the world asked his broker to lean on his standard operating procedure for most of ing sector) had opened up a widespread investigation into whether the all-impor- him a prodigiously nimble trader, he told En- starts to make had contacts and confidantes in tant Libor could have been rigged by a number of key banks to their own ends. The rich, and had allowed him to leapfrog posi- cabal of contacts in order to a little sense.’ every corner of the banking ma- these guys.’ allegations were simple: that this obscure yet omnipotent number had been artifi- tions and pay grades on his journey from RBS nudge the six-month prediction chine. ‘But I was flabbergasted Most of them – but not Tom Hayes. cially fixed by a cabal of international bankers to make good on their gargantuan to the Royal Bank of Canada, and then on to for Libor higher. He suggested Trader 2: by what the inside of this world trades. It was a bit like alleging that the Grand National had been rigged for years, UBS. It was here, in the Swiss bank’s Tokyo that the broker cook up a bogus ‘The whole HF looked like,’ he says. ‘This was an and that every single one of the racehorse owners was in on it. In the summer of that office, that Hayes was given a new remit to sequence of statistics to make it [hedge fund] unvarnished view of what was world will be "Mate, you’re getting year, Barclays became the first bank to accuse some of its own brokers and submit- look into unorthodox and highly-complex in- appear that this was the direc- going on – and I’d sit up with my kissing you bloody good at this Libor ters of manipulating their rates, and soon its CEO, Bob Diamond, had resigned. RBS vestment strategies that could give the desk tion that other banks were instead of calling headphones and just trawl had fired four employees over similar suspicions a few months earlier. By Decem- an edge on its competitors. One of these strat- moving in, in the hope that still me if Libor moves through these hours and hours game. Think of me when ber 2012, UBS became the second bank to be fined for in-house wrongdoing and had egies was to hedge bets based on movements more banks would follow suit; lower.’ of phone calls. It was a weird mix you’re on your yacht in agreed to settle to the tune of $1.5 billion. in the Libor – a number that Hayes soon be- that the stack of dominoes might of mundane stuff they’d done It was clear that the scandal was colossal in its scope and murkier than any that came obsessed with thanks to its huge mon- be toppled by a kick to the table. Trader 1: that morning, and then suddenly Monaco, won’t you?" ‘OK, I will move had come before it. But because the main players were under close investigation ey-making potential. (Hayes would even And Hayes kept kicking. these graphic descriptions of the the curve down from a cavalcade of authorities across several continents, it was astronomically un- muse about the rate on his Facebook wall: Enrich attributes this appar- one basis point, things they’d done to prostitutes likely that any of them would break rank and talk to a journalist, much less one from ‘Tom needs a high three-month,’ he’d write. ently flagrant risk-taking not maybe more if the night before, jokes about the the Wall Street Journal, the paper that had been so heavily involved in the first wave When Bank of America rejected his prods, he to testosterone or one-upman- I can.’ lies they’d told their wives. of allegations. ‘I threw a minor journalistic tantrum, then grudgingly sent out a few posted: ‘Can’t stand B of A! Booooo!’) ship but to Hayes’ Asperger’s ‘This entire industry revolves hopeful messages,’ Enrich remembers. ‘I was aware that the Serious Fraud Office The ploy was as old as the Libor itself. Syndrome. Transcript of around keeping clients happy,’ had arrested a British guy called Tom Hayes, so I thought I’d try to talk to him.’ En- Traders would ask their bank’s rate submit- ‘He was terrible at reading fa- conversation he elaborates. ‘And one of the between RBS cial cues, and was known to be rich didn’t hold out much hope. But then, one evening, he received a text message. ters to fix the rate at a certain level, knowing yen traders in ways to do that is to spend a lot of ‘I’ll meet you tomorrow but I need to be certain that I can trust you,’ it read. ‘This that this would very likely influence the very bad with people,’ Enrich Singapore, 21 money on them in the form of goes much higher than me and a lot of what I know even the DOJ [Department of global Libor rate at large. They’d then take a says. ‘So he found it impossible August 2007. “entertainment”.’ In the years Justice] is in the dark [about].’ It was from Tom Hayes. What followed was a rela- position on which way the dial would shift, to know when he was crossing an leading up to the Libor scandal, tionship that spanned several years, thousands of secret meetings, and a deranged and stand to profit the moment they were invisible line. All he had been the unspoken industry agree- web of characters in which Hayes found himself at the mathematical centre. And proved correct. told was to make as much money as possible ment was that five to 10 per cent of revenue the rot, it soon became apparent, went deeper than anyone had guessed. ‘If some- This was the manipulation that Hayes for the bank. And that, in his eyes, was all he from a trade was to be spent on the clients thing was wrong with Libor, I realised, the pool of potential victims would be vast,’ made his bread and butter – a scam shrouded was doing.’ responsible. ‘On a $2 million trade, for exam- Enrich says. ‘As it turned out, something wasn’t wrong with Libor; everything was.’ in grey areas and criss-crossed by invisible The risk of being exposed was higher ple, that’s at least $100,000. You can’t spend boundaries and regulations. But because the than ever before. But so too were the profits. that very easily unless you get creative.’ numbers were so far removed from the public ‘Mate, you’re getting bloody good at this Enrich’s book is a feast of such misspent gaze and so swathed in jargon, there was very Libor game,’ Hayes’ broker, Terry Farr, told creativity. There’s all the usual trimmings: little danger of anyone kicking up much of a him on the eve of his gargantuan deception. ringside seats at Hatton-Mayweather in Las fuss. Some brokers would execute the trades ‘Think of me when you’re on your yacht in Vegas; private jets to Japanese ski chalets; Tom Hayes' broker Terry Farr was outside of the usual brokerage software so Monaco, won’t you?’ £20,000 bottles of wine; silos of cocaine; cleared of his charges

2008 2009 2010 2011 2012

Scam uncovered Game over A Wall Street Journal article coincides A dozen officers from the SFO arrive to with the CFTC opening a similar arrest Hayes at his home in Surrey. They HOW DID IT investigation into Libor rigging. allow him to eat a piece of toast and drink a cup of tea as he's taken away. HAPPEN? Trading high Closing in Fortunes change As Libor is manipulated Tom Hayes becomes Citigroup lure Hayes with a $3m signing Hayes is fired for attempting to a rising star at UBS, where by the age of 28 he bonus as the Treasury gives Serious manipulate Libor after the CFTC and was up $70m on trades for the year. Fraud Office $3m to investigate Libor. Citigroup begin working together.

GENTLEMAN’S JOURNAL FEATURES 79 THE night; how he’s racked by panic attacks and in condemnation of the institutions them- PTSD. She mentions how Hayes had to decide selves. She tells me how their son Joshua is DEFENDANT between eating at night or talking on the desperately learning how to read in the hope phone to her; how when you only have eight that he can help his father by working on the ‘I very quickly learned that Tom was not your minutes to talk, you suddenly find it hard to upcoming appeal. stereotypical, Central Casting, Wolf of Wall say anything at all. Hayes has since moved to ‘My biggest takeaway from the scandal is Street caricature,’ Enrich says. ‘In the two and a better-equipped prison, and can now read that the guys who end up getting in trouble a half years when we were speaking almost his son, Joshua, a bedtime story every night. are almost always the easiest targets – social- every day, I must have spent thousands of They practice addition and subtraction down ly awkward, brilliant, but personally very pounds on orange juice for him.’ the phone. fragile,’ Enrich says. ‘But you won’t change The transcripts leaked to Enrich show how ‘When the jury read out the verdict, it felt the culture by picking these guys off. The law Hayes earned the nickname Tommy like a punch in the stomach,’ Enrich says. is not serving its purpose. What message does Chocolate at UBS after his preference for hot I ask him whether he thinks Hayes was guilty it send? That as long as you’re smart, you can chocolate over champagne. When Terry Farr or not. ‘I don’t know,’ he says. ‘I know that he be as crooked as you like. You’ll probably even would travel from London to visit Hayes in was the only one who was stupid enough to get promoted.’ The result of this decade-long Tokyo, he’d bring with him a suitcase filled commit absolutely everything he did to writ- investigation? ‘Another scandal, just around with tinned Heinz ravioli as a gift. Hayes’ ing. Which makes you think: either this guy is the corner, but even more egregious. Wheth- wife, Sarah Tighe, tells me how one broker the stupidest fraudster alive, or he didn’t er it’s this year or next, we are on the preci- begged and pleaded to take Hayes out on his know what he was doing was wrong.’ pice of something far bigger than Libor. Then expense account. Finally, Hayes agreed to a Tighe laughs in agreement when I read her we’ll have the autopsy and everyone will say: regular curry night. They’d order a takeaway that quote. She’s hopeful of the success of the “How did we let this happen?”. And then we’ll curry, have one beer each, and watch Hayes’ appeal, and believes that the tides of opinion put someone in prison, slap his boss on the favourite film,The Blind Side. Same dishes, are changing in favour of the individuals and wrist, and start all over again.’ same film, same time – every weekend for several months. If Enrich’s book is ever trans- formed into a screenplay, the writers will have a tough time inflating the protagonist to the dimensions of Gordon Gekko or Jordan Belfort, or the traders in Michael Lewis’ Flash Boys, or the louche mortgage brokers in The Big Short. When I ask Tighe to sum up her husband in a few words, she describes him, with a laugh, as super boring. But when the Libor party ended, it was Hayes who had to swallow the collective hangover. On 3 August 2015 he was sentenced to 14 years; after an appeal the following December, this was reduced to 11. Tighe agreed to speak to me only off the record, wary that Hayes’ latest appeal – filed at the end of January this year on the back of new evidence that was undisclosed by the SFO – hangs precariously in the balance. She talks more about Hayes the man than Hayes the defendant – how incredibly ill-equipped he was to deal with the immense global scru- tiny; how he lost weight and most of his hair during the trial; how he still feels as though his heart is bursting through his chest every Tom Hayes and his wife Sarah Tighe leaving Southwark Crown Court

2015 2016 2017

Read all about it Veteran Wall Street Journal writer David Enrich publishes The Convicted Brokers acquitted Spider Network, telling the incredible Hayes is found guilty of eight counts of Six brokers formerly of ICAP, Tullett Prebon and story of the Libor conspiring to fix the international interbank RP Martin accused of helping Hayes are aquitted. rigging scandal. lending rate and sentenced to 14 years in prison. Available now £14.99

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