Conclusion of SFO investigation into LIBOR manipulation

15 November 2019

On 18 October 2019, the Serious Fraud Office (SFO) announced that it has concluded its investigation into the manipulation of the London inter-bank offered rate (LIBOR).

LIBOR is the key benchmark interest rate at which major financial institutions lend to one another in the short-term money markets.  As such, the rate is generally accepted as indicating borrowing costs between banks and underpins many trillions of debt in financial transactions globally.

Each day, a number of major global banks are asked how much they would charge other banks for short-term loans in five currencies and seven different maturities (e.g. overnight, one week, three months).  The highest and lowest submissions are removed and a “trimmed average” is taken of the remaining submissions, with the resulting rates for all currencies and maturities published daily.

As the fall-out from the financial crisis began to clear, it was alleged that major banks had colluded to manipulate LIBOR.  For example, in allegations of “lowballing”, it was claimed that banks made lower submissions further to requests from traders at certain banks in order to artificially increase profits on positions held by those traders in LIBOR-based financial securities.

The SFO’s investigation began in 2012, two days after it had been announced that Barclays had reached a settlement with UK and US regulators in relation to claims of LIBOR manipulation by a number of its traders, paying a reported $290m.  Then-chancellor, George Osborne, called the scandal a “shocking indictment of the culture at banks”.  It has been reported that banks globally have paid something in the region of £7bn in settlements with financial regulators regarding alleged LIBOR manipulation.

While the SFO appears to regard the investigation as a success, charges of conspiracy to defraud were brought against only thirteen individuals, with four convictions, one guilty plea and eight acquittals.  The investigation is reported to have cost at least £60m.

The conviction that received the most media attention was that of Tom Hayes, a former derivatives trader at UBS in London, who was found guilty of eight counts of conspiracy to defraud and sentenced to eleven years in prison.  Two months later, six traders were charged with conspiracy to defraud based on allegations that they manipulated YEN LIBOR on Mr Hayes’ instructions.  All six traders were eventually acquitted, leading Mr Hayes to comment that he had been convicted of conspiring with nobody.  Mr Hayes is alleging a miscarriage of justice in his trial and his case is being reviewed by the UK criminal cases review commission.

One mis-step that has gained some notoriety is the SFO’s instruction of an expert witness who admitted during cross-examination that he had texted trader friends for help in understanding trader terminology used in the documents in the case, leading his expertise to be called into question.

Many lawyers have gone on the record to assert that the SFO should have abandoned its investigation sooner, questioning why it took so long to reach a decision as to whether or not to prosecute.  The SFO makes charging decisions on the basis of the Code for Crown Prosecutors, which specifies that the evidence must support a reasonable prospect of conviction and must be in the public interest.  The SFO has not confirmed which of these two limbs were not met, leaving the public in the dark as to whether there was insufficient evidence or prosecution was not deemed to be in the public interest, or both.

The SFO’s statement on 18 October confirmed that aspects of its investigation into the European inter-bank offered rate, EURIBOR, remain open, so more prosecutions may follow in due course.


Harry Stewart Author
Harry Stewart
Senior Associate
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