The journey that led Tom Hayes to a drab courthouse on the banks of the River Thames started 6,000 miles away on a buzzing trading floor in Tokyo's financial district in the summer of 2006.
Hayes had been at UBS Group AG for less than two months and was sitting on a losing bet on the direction of yen Libor, a lending rate set by a survey of banks. On a call that afternoon, a broker in London suggested he could help the young trader by influencing where rival lenders set their rates, Hayes testified during his trial.
The conversation was a light-bulb moment, he recalled. And so began the nine-year saga that culminated in his conviction on Monday on eight counts of conspiracy to rig the London interbank offered rate, the benchmark used to value more than $350 trillion of loans and securities.
The scruffy 35-year-old is the first person to stand trial for manipulating Libor. Dressed in a light blue shirt and sweater, Hayes shook his head and looked to his wife as the jury returned its verdict after a week of deliberations. He was sentenced to 14 years in prison. Former UBS rogue trader Kweku Adoboli was sentenced to seven years in jail in 2012 after racking up a $2.3 billion loss.
Hayes's court case was about more than one man's guilt or innocence. The Libor scandal has become a byword for much that went wrong with the financial system at the start of the 21st century. Also at stake was the reputation of a legal system criticised for failing to hold bankers to account for their actions.
It was an open secret that banks, including UBS, made submissions that favoured their own derivatives positions when estimating their borrowings costs for the yen Libor survey.
Hayes realised that interdealer brokers in London, the middlemen who matched buyers and sellers, were uniquely positioned to influence the submissions of multiple firms. They sat at the epicentre of the market, and traders often asked their brokers where they expected to see Libor rates each day. Many simply reproduced the figures the brokers gave them.
The success of getting it right, the success of finding market inefficiencies, the success of identifying opportunities and then when you get it right, it's like solving that equation... It's make money, lose money, and it's just so pure.
In the months following that initial phone call in Tokyo, Hayes set to work recruiting a group of brokers willing to skew their recommendations in exchange for lucrative commissions. He acted with the awareness of his bosses and even discussed his activities in morning meetings, Hayes testified.
During the trial, jurors were told how Hayes bribed, bluffed, and bullied some 25 traders and brokers at no less than 10 firms to do his bidding. Six will stand trial over their alleged involvement later this year. Across the industry more than 100 traders and brokers have been fired or suspended and twenty-one have been charged.
Born in the urban sprawl of West London's Hammersmith, Hayes's parents divorced when he was a child. His mother remarried in 1991, and moved with Tom and his brother Robin to the leafy, affluent, commuter town of Winchester to live with her new husband and his two sons.
Hayes started out in 2001 as a 21-year-old in Royal Bank of Scotland Group Plc's graduate program. His colleagues ribbed him when they discovered he slept on the same superhero bed sheets he had when he was 8.
"I didn't see the point in buying another duvet cover," Hayes recalled on the stand, prompting laughter from the gallery. "I had one that was perfectly adequate."
He joined Royal Bank of Canada three years later to take up a bigger role. During his time in London, Hayes met the brokers who would play a central role in his efforts to push Libor around.
Sullen and intense, Hayes was obsessively focused on his trading book, he told jurors. When his colleagues piled out of the office in the evenings and headed for the bars and clubs of Tokyo, Hayes stayed behind to fine-tune his spreadsheets and monitor US markets.
On the rare occasions he went out, he stuck to hot chocolate, earning the moniker "Tommy Chocolate." He rose early, worked at least 12 hours a day and rarely stayed up past 10 p.m. He often got up to check his positions during the night.
In the weeks leading up to the trial, Hayes was diagnosed with a mild form of Asperger's Syndrome. Symptoms include obsessive behaviour, social problems, and an aptitude for math.
Hayes memorised the entire 164-page Highway Code when he was learning to drive, according to a statement from a friend read to the jury. While those traits earned him nicknames like "Rain man" and "Kid Asperger's," they also made him uniquely suited to his job as a derivatives trader.
"The success of getting it right, the success of finding market inefficiencies, the success of identifying opportunities and then when you get it right, it's like solving that equation," Hayes said on the stand. "It's make money, lose money, and it's just so pure."
His ability to influence Libor grew with the demise of Lehman Brothers Holdings in September 2008. Amid the chaos, cash markets seized up as banks hoarded money.
That left Libor setters, who were required to submit a rate to the British Bankers' Association every day, more dependent than ever on the interdealer brokers for information.
Hayes's brokers, who were by now increasingly reliant on him for income, routinely passed on his desired Libor figures to rate setters, said Mukul Chawla, the prosecutor. One sent out a daily e-mail to more than 100 traders with his suggested Libor submissions, tailored to Hayes's preferences.
Around this time, he began paying kickbacks to other brokers through so-called wash trades, where counterparties place two or more matching deals through the broker that cancel one another out, but still trigger fees for the middle man, prosecutors said.
"If you keep 6's unchanged today, yeah, I will f---ing do one humongous deal with you," Hayes said on a September 18, 2008, call with one broker, referring to the six-month yen rate. "Like a f---ing 50k buck deal."
Hayes started asking contacts at other banks for favours with their Libor submissions. He even tried to enlist his step brother, then a graduate trainee at HSBC Holdings Plc, in the scheme, prosecutors said.
"I used to dream about Libors," Hayes said in a 2013 interview with the Serious Fraud Office. "They were my bread and butter, you know. That was the thing. They were the instrument that underlined everything that I traded."
While some traders floundered during the crisis, Hayes made a name for himself as the dominant player in the yen market. He brought in $80 million for UBS in 2008, double the preceding 12 month's tally.
Goldman Sachs Group tried to hire him that year, dangling a $3 million signing-on payment, according to an e-mail sent by one of his UBS bosses that was made public during the trial. UBS countered with a guaranteed $2.5 million bonus, but later reneged on the deal when the financial crisis hit. Feeling betrayed, Hayes accepted a job with Citigroup in 2009 that included a $3 million golden handshake.
I probably deserve to be sitting here because, you know, I made concerted efforts to influence Libor... Although I was operating within a system or participating within a system in which it was commonplace, you know, ultimately I was someone who was a serial offender.
Hayes said he thought it would be business as usual when he joined the US bank, and carried on asking his contacts for favours with Libor. He also approached Citigroup's internal rate setters to get them on board, but was told more than once they couldn't take his positions into account.
What Hayes didn't know was that Citigroup was already cooperating with the Commodity Futures Trading Commission's investigation into Libor rigging. The head of the desk that set the yen rates, Andrew Thursfield, had even delivered an 18-page presentation to the investigators on the Libor-setting process.
On June 25, 2010, Hayes persuaded a junior derivatives trader in London to ask the yen rate setter to increase the bank's six-month Libor submission. Thursfield reported the exchange to compliance, sparking an internal investigation.
Less than three months later, Hayes was called into a conference room packed with executives, lawyers and compliance officers and told he was being fired for attempting to manipulate Libor. He'd been at the firm less than a year.
In the months that followed, Hayes tried to move on. He returned to England and married Sarah Tighe, a corporate lawyer he'd met at a swimming pool in Tokyo. The following year, they bought a seven-bedroom house - a 4,000-square-foot former vicarage in a picturesque Surrey village - and had a son.
Hayes was nearing the end of an MBA course in June 2012 when Barclays Plc became the first bank to settle with regulators over allegations of Libor rigging. A firestorm ensued that embroiled the Bank of England and led to the resignation of top executives including Barclays Chief Executive Officer Bob Diamond. In the aftermath, the Serious Fraud Office began a criminal investigation into Libor.
Just after 7 a.m. on December 11, 2012, Hayes answered the door of his newly renovated house to find more than 20 policemen and SFO investigators outside. After reading Hayes his rights and searching his home, they drove him to Bishopsgate Police station in central London and laid out the charges against him.
Eight days later, Hayes was at home watching television when US Attorney General Eric Holder came on and said he would be criminally charged. UBS had settled with the authorities that morning, agreeing to pay more than $1 billion in fines and have its Japan unit plead guilty to wire fraud. The news that he could be extradited to the US hit Hayes hard.
"I was just petrified," he recalled at trial. "I had no support network in the States. I was living life then on a sort of 24-hour time horizon. Just how do you get through it? How do you survive?"
Hayes wrote to the SFO the next day and offered to cooperate with their probe. In 82 hours of interviews with investigators that followed, he laid out how the scam worked and who was involved.
"I probably deserve to be sitting here because, you know, I made concerted efforts to influence Libor," Hayes told the SFO in an interview. "Although I was operating within a system or participating within a system in which it was commonplace, you know, ultimately I was someone who was a serial offender."
He was admitted to the SFO's whistle-blower program later that year and charged in the UK, meaning the US couldn't extradite him. He recalled it was like getting the all-clear after a cancer diagnosis.
As the SFO was wrapping up its case months later, they received an e-mail from Hayes's lawyers. He told them he was withdrawing from the process and changing his plea to not guilty. The trader took one last throw of the dice.
Hayes disavowed his SFO interviews, claiming he had exaggerated his culpability to make sure he would be charged in Britain. What the trader couldn't undo were the hours of damning confessions, played to jurors through the court's speakers, that formed the bedrock of the prosecution's case.
When Hayes was led out of the dock by a security guard to spend the night in custody, it was apparent that gamble hadn't paid off.
"There is no separate standard of dishonesty for any group of society and what you did with others was dishonest," Judge Jeremy Cooke said after sentencing. "The conduct involved here has to be marked out as dishonest and wrong and a message sent to the world of banking."