Was Tom Hayes Running the Biggest Financial Conspiracy in History?


On a deserted trading floor, at the Tokyo headquarters of a Swiss bank, Tom Hayes sat rapt before a bank of eight computer screens. Collar askew, pale features pinched, blond hair mussed from a habit of pulling at it when he was deep in thought, the British trader was even more disheveled than usual. It was Sept. 15, 2008, and it looked, he would later recall, like the end of the world.

Hayes had been woken at dawn in his apartment by a call from his boss, telling him to get into the office immediately. In New York, Lehman Brothers was plunging into bankruptcy. At his desk, Hayes watched the world process the news and panic. Each market as it opened became a sea of flashing red as investors frantically dumped their holdings. In moments like this, Hayes entered an almost unconscious state, rapidly processing the tide of information before him and calculating the best escape route.

Hayes was a phenom at UBS, one of the best the bank had at trading derivatives. All year long, the financial crisis had been good for him. The chaos had let him buy cheaply from those desperate to get out, and sell high to the unlucky few who still needed to trade. While most dealers closed up shop in fear, Hayes, with his seemingly limitless appetite for risk, stayed in. He was 28 years old and he was up more than $70 million for the year.

Now that was under threat. Not only did Hayes have to extract himself from every deal he’d done with Lehman, but he’d made a series of enormous bets that in the coming days, interest rates would remain stable. The collapse of the fourth-largest investment bank in the U.S. would surely cause those rates, which were really just barometers of risk, to spike. As Hayes examined his tradebook, one rate mattered more than any other: the London interbank offered rate, or Libor, a benchmark that influenced $350 trillion of securities around the world. For traders like Hayes, this number was the Holy Grail. And two years earlier, he had discovered a way to rig it.

Libor was set by a self-selected, self-policing committee of the world’s largest banks. The rate measured how much it cost them to borrow from each other. Every morning, each bank submitted an estimate, an average was taken, and a number was published at midday. The process was repeated in different currencies. During his time as a junior trader in London, Hayes had gotten to know several of the 16 individuals responsible for making their bank’s daily submission for the Japanese yen. His stroke of genius was realizing that these men mostly relied on interdealer brokers, the fast-talking middlemen involved in every trade, for guidance on what to submit each day.

If Hayes could manipulate the system at the peak of the worst crisis in memory, there seemed to be no limit to what he could do next.

Hayes saw what no one else did because he was different. Hayes’s intimacy with numbers, his cold embrace of risk, and his manias were more than professional tics; they were signs that he’d been wired differently since birth. Hayes would not be officially diagnosed with Asperger’s syndrome until 2015, when he was 35, but his coworkers, many of them savvy operators from fancy schools, often reminded Hayes he wasn’t like them. They called him Rain Man. Most traders looked down on brokers as second-class citizens, too. Hayes recognized their worth. He’d been paying them to lie ever since he had.

By the time the market opened in London, Lehman’s death was official. Hayes instant-messaged one of his brokers in the U.K. capital to tell him what direction he wanted Libor to move. “Cash mate, really need it lower,” he typed, skipping any pleasantries. “What’s the score?” The broker sent his assurances, and, over the next few hours, followed a well-worn playbook. Whenever one of the Libor-setting banks called and asked his opinion on what the benchmark would do, the broker said—incredibly, given the calamitous news—that the rate was likely to fall. Libor was often called “the world’s most important number,” but this was how it was set: conversations among men who were, depending on the day, indifferent, optimistic, or frightened. When Hayes checked later that night, he saw to his inexpressible relief that yen Libor had fallen.

Hayes was not out of danger yet. Over the next three days, he barely left the office, surviving on three hours of sleep a night. As the market seesawed, his profit and loss in one stretch went from minus $20 million to plus $8 million in just hours. Amid the bedlam, Libor was the one thing Hayes had some control over. He cranked his network to the max, offering his brokers extra payments for their cooperation, and calling in favors at banks around the world. By Thursday, Sept. 18, Hayes was exhausted. This was the day he’d been working toward all week. If Libor jumped today, his puppeteering would have been for naught. Libor moves in increments called basis points, equal to one one-hundredth of a percentage point, and every tick was worth roughly $750,000 to his bottom line.

For the umpteenth time since Lehman faltered, Hayes dialed one of his most trusted brokers in London. “I need you to keep it as low as possible, all right?” Hayes said. “I’ll pay you, you know, $50,000, $100,000, whatever. Whatever you want, all right?”

“All right,” the broker repeated.

“I’m a man of my word,” Hayes said.

“I know you are. No, that’s done, right, leave it to me,” the broker said.

Hayes was still in the office when that day’s Libor was published at noon in London. The yen rate had fallen one basis point, while comparable money market rates in other currencies continued to soar. Hayes’s crisis had been averted. Using his network, he had personally tilted one of the central pillars of the planet’s financial infrastructure. He pulled off his headset and headed home to bed. He’d only recently upgraded from the superhero duvet he’d slept under since he was 8 years old.

Thomas William Alexander Hayes had always been an outsider. Raised in the urban sprawl of Hammersmith, West London, in the 1980s, Hayes was bright but found it hard to connect with other kids. His parents divorced when he was in primary school; when his mother remarried, he moved to the leafy, affluent town of Winchester. Hayes held onto his inner-city accent, traveling back to the capital on weekends to watch Queens Park Rangers, perennial underdogs.

Lots of British boys were die-hard football fans, but Hayes’s interest was something more like obsession. Fixations are a symptom of Asperger’s, along with social problems, elevated stress, and a propensity for numbers over words. The kids in Winchester bullied him for it. Hayes remained a peripheral figure in college, at the University of Nottingham. While his fellow students took their summer holidays, he paid for school by cleaning pots and lugging kitchen supplies for £2.70 an hour.

Seeking better money, Hayes won an internship at UBS in London. After graduating, in 2001, he joined Royal Bank of Scotland as a trainee on the interest rate derivatives desk. For 20 minutes a day, as a reward for making the tea and collecting dry cleaning, he was allowed to ask the traders anything he wanted. It was an epiphany. Unlike the messy interactions and hidden agendas that characterized day-to-day life, the formula for success in finance was clear: Make money and everything else will follow. It became Hayes’s guiding principle, and he began to read voraciously about markets, options pricing models, interest rate curves, and other ­financial arcana.

In the laddish, hedonistic culture of the money markets, the awkward 21-year-old was an odd fit. On the rare occasions he joined other bankers on their nights out, he stuck to hot chocolate. They called him “Tommy Chocolate,” and blurted out Rain Manquotes like “Qantas never crashed” as Hayes walked the trading floor. He was bad at banter, given to taking quips and digs at face value. The superhero duvet was a particular point of derision. The bedding was perfectly adequate, Hayes thought; he didn’t see the point in buying another one.

Not everyone in finance was a jerk. Hayes made a few friends, and he found that his machine-gun approach to messaging and trading made him a favorite among brokers, who didn’t care where a trader had gone to school as long as he brought them deals. And ultimately, Hayes went along with the jokes because the obsessive traits that had marginalized him socially turned into power the moment he logged on to his trading terminal. For all the ribbing, Hayes had found a place where he belonged. He rose early, worked at least 12 hours a day, and rarely stayed awake past 10 p.m. He often got up to check his trading positions during the night.

Particularly, Hayes was taking positions in interest rate swaps. Originally designed to protect companies from fluctuations in interest rates, swaps were now mostly bought and sold between professional traders at banks and hedge funds, another form of high-stakes security to wager on. The market for swaps was exploding. In 2000, $50 trillion of the securities changed hands every year. In 2010, it was $500 trillion. For Hayes, the complex calculations and constant mental exertion came easily, but he found he had something rarer: a steely stomach for risk. While other rookie traders looked to book gains or curb losses quickly, Hayes rode out volatile market swings. In those early years his results were mixed, but his superiors knew a natural when they saw one. In 2004, Hayes was headhunted by Royal Bank of Canada, a smaller outfit where Hayes could take a more prominent role. He was given his own trading book focused on the yen derivatives market.

Traders at the largest firms recall suddenly seeing minnow RBC taking the other side of big-ticket deals. Hayes may have been baffled by the simple rituals of office camaraderie, but when he looked at the serpentine matrix of yen derivatives he saw clarity. “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 would later say. “It’s make money, lose money, and it’s just so pure.”

In the summer of 2006, Hayes was poached again, this time by UBS. RBS, RBC, UBS—the name on the door mattered little to Hayes, as long as he had a phone, his screens, and the bank’s balance sheet to wager. The firm sent him to Tokyo, a major promotion that officially retired his image as a cocoa-sipping, blankie-clutching eccentric, and recognized him for what he’d become: an aggressive and formidable trader.

In poker, there are two types of player: tight folk who wait for the best hands, then bet big and hope to get paid; and hawks who can’t resist getting involved in every hand, needling opponents and scaring the nervous ones into folding. Hayes was firmly in the latter camp. His M.O. was to trade constantly, picking up snippets of information, racking up commissions as a market maker, and building a persona as a high-volume, high-stakes risk-taker.

Hayes moved to Japan just as the government raised interest rates for the first time in a generation, reinvigorating a multitrillion-dollar market that had been lying dormant. Most of the instruments he traded referenced Libor. There are Libor rates for all the major currencies, and for time frames ranging from overnight to 12 months. On any given trade, Libor was the single most important number that determined profit or loss. By now, Hayes knew that the art of trading involves building a sense of the future based on incomplete and evolving information. Where Libor would land tomorrow was the great unknowable. It became his mission to control the chaos around him, to eradicate the shades of gray. “I used to dream about Libor,” Hayes said years later. “They were my bread and butter, you know. That was the thing. They were the instrument that underlined everything that I traded. I was obsessed.”

Hayes loved his job, but when things weren’t going his way, he hated it just as fiercely. On the fifth floor of UBS’s Tokyo headquarters, he stared at his bank of screens, fuming. It was October 2006. He’d only been at the bank a matter of weeks and was already in a hole, on the losing side of a huge bet on the direction of short-term interest rates. Yen Libor was refusing to budge, and he was getting angrier.

While finance had been transformed by technology over the past quarter century, the way Libor was set remained rudimentary. Every day, banks in London told the British Bankers’ Association how much it might cost them to borrow in various currencies, for various lengths of time. There were 150 total combinations. For each one, the top and bottom quarter of figures are discarded, and the average of the remaining numbers became that day’s Libor. That was it. Libor was a component in securities ranging from U.S. student loans and credit cards to Kazakh gas futures, but it was determined each day by just a handful of distracted, guesstimating individuals.

Later that afternoon in Tokyo, Hayes was venting about his predicament to one of his London brokers, a trusted confidant. The broker offered to talk to his colleague, who was in charge of e-mailing a daily Libor prediction—unofficial but handy—to the small group of bankers that came up with the number. (The U.K. court has ordered that the two men cannot be named because they are facing trial.) The e-mail was supposed to be impartial, but if Hayes wanted, the broker said, he could skew the guidance lower. Maybe some of the lazier rate setters, those who didn’t do much business in the currency anyway, would simply follow along.

For Hayes, it was a light-bulb moment. He knew that banks had always tailored their Libor submissions to benefit their own positions, but the system resisted tampering: no single institution could have much impact on the overall rate when 15 other banks were doing the same thing. But Hayes had worked at enough banks and befriended so many brokers that he realized he could sway several submitters at once. He could pull their strings without them even knowing it. And Hayes was on better terms with his brokers than most. They had in Hayes a kindred spirit—a state school Londoner with a cockney accent.

Hayes’s broker did as he was asked. The intervention didn’t make much difference, but the idea had taken root. Later that month Hayes went back to the broker, and also approached a second for good measure. This time, Hayes wanted six-month yen Libor to go up. He had a 400 billion yen ($3.3 billion) position about to mature, and every increase of a hundredth of a percentage point (or basis point) was worth hundreds of thousands of dollars. Hayes bombarded his brokers with IMs and phone calls, and over the next few days the rate rose by almost three basis points. Hayes e-mailed his boss, Mike Pieri, to express his delight that the plan had worked—infinitesimally, but when multiplied by the size of Hayes’s bets, valuably. Later that week, he wrote to his broker: “Whatever it takes, bill me.”

Hayes discovered that Libor was not only easy to manipulate, but cheap as well. The London broker had won his colleague’s cooperation by dangling nothing more than a free curry. Hayes began reaching out to traders he knew at other banks, asking for their help in moving the rate. By the spring of 2007, his network had grown to include traders at RBS and JPMorgan Chase. One of his recruits was his stepbrother, Peter O’Leary, a graduate trainee at HSBC in London.

After some small talk over e-mail in April, Hayes asked: “Do you know the guy who sets yen Libors at your place? I think he trades yen and scandi cash and his name is Chris Darcy.”

“Ha ha yeah I do!” O’Leary typed. “His name is actually Chris Porter I think. Everyone calls him Darcy, I think, cos he sounds pretty posh.”

Hayes asked O’Leary to press his colleague for low three-month Libor. Every basis point, he said, was worth $1 million. In a series of phone calls, Hayes told his stepbrother how to make the approach, suggesting he befriend the man over a few pints. O’Leary was reluctant, noting that the rate setter worked on a different floor, in a different part of the business. Hayes persisted, and O’Leary eventually hit his colleague up for the favor. Tommy Chocolate had come a long way. Hayes later apologized to O’Leary for involving him, and never asked for a Libor favor again.

At UBS he showed no inhibitions. At regular 8:30 a.m. meetings, he discussed his positions and explained to colleagues and bosses how he planned to influence the rate. That summer, Hayes formalized his arrangement with one of his interdealer brokers. On top of the fixed monthly fee UBS paid for its services, Hayes negotiated an additional £15,000 a month for helping to move the benchmark, £5,000 of which was personally earmarked for the broker who sent the daily Libor prediction e-mail.

A UBS spokesperson said: “To suggest that Hayes had a ‘light-bulb’ moment at UBS about Libor manipulation is ludicrous. Neither Hayes nor UBS invented or initiated LIBOR manipulation. It was industry-wide conduct involving many banks and brokers acting individually and collectively over a prolonged period of time.”


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