An alleged associate of a New Zealand resident accused of trying to manipulate international banking rates has been jailed for 14 years.
Wellington resident Darrell Read is due to go to trial before a jury in the United Kingdom in September and has pleaded not guilty to two charges of conspiracy to defraud.
Ex-Citibank and UBS trader Tom Hayes, allegedly one of Read's former clients, was jailed today in London after a jury found him guilty of masterminding the manipulation of the London Interbank Lending Rate, or Libor.
Judge Jeremy Cooke sentenced 35-year-old Hayes, who specialised in products pegged to yen-denominated Libor. He was charged with conspiring with other traders but says he was made a scapegoat for a common practice.
"What this case has shown is the absence of that integrity which ought to characterise banking," Judge Cooke said. "You, as a regulated banker, succumbed to temptation in an unregulated activity because you could."
Libor is a key rate that banks use to borrow from each other. Revelations that it was rigged shook the markets because the rate affects what many people pay when they take out loans for things such as cars.
The UK Serious Fraud Office accuses Read of conspiring with two colleagues at London-based broking house ICAP, to make false submissions for Yen Libor for the benefit of Hayes.
The alleged offending by Read and others is said to have taken place between August 2006 and September 2010 while Hayes worked at UBS in Japan and then at Citigroup.
"Knowing or believing that UBS, through the trading activity of Tom Hayes and others, was a party to trading referenced to London Interbank Offered Rates for Japanese Yen [Yen Libor], they dishonestly agreed to procure or make submissions or rates by panel banks into the Yen Libor setting process which were false and misleading," according to documents detailing the charges in the case.
It is further alleged the defendants deliberately disregarded the proper basis for making Libor submissions and hoped to create an advantage for Hayes' trading, "thereby intending to prejudice the economic interests of others".
Although Read moved to New Zealand in 2007, he continued working for ICAP - which in 2013 was fined US$87 million by regulators on both sides of the Atlantic for its role in the Libor scandal, which has seen numerous financial institutions penalised.
The Libor Rates Rigging Case:
• Libor - or London interbank offered rate - is woven into the fabric of the world's capital markets.
• The rate sets the price for banks, international financiers or anyone wanting to raise funds through the interest rate markets.
• From major international deals through to home mortgages, Libor is key to the relationship between borrowers and lenders globally.
• Financial instruments worth hundreds of trillions of dollars are tied to Libor.
• A British banking trade group sets the Libor every morning after international banks submit estimates of borrowing costs.
• Libor became engulfed in scandal after the global financial crisis and allegations emerged that banks had rigged these rates.
• A string of financial institutions have paid billions in settlements.