LONDON Former UBS UBSN.VX and Citigroup (C.N) trader Tom Hayes conspired with employees from at least 10 financial institutions to manipulate benchmark interest rates over four years, British prosecutors alleged in court on Thursday.
Hayes is the first suspect to be brought before a court in a inquiry stretching from North America to Asia into how traders rigged crucial benchmark rates such as Libor (London interbank offered rate), against which trillions of dollars of loans are priced.
The scandal, which has sparked public and political outrage and laid bare the failings of authorities and bank bosses, has to date seen UK and U.S. regulators fine three banks a total of $2.6 billion and prosecutors and police charge two men, including Hayes.
Dressed in a blue, open-necked shirt and cream trousers, 33-year-old Hayes stood in the dock at London's Westminster Magistrates' Court as eight offences were read out relating to his employment in Japan at UBS and Citigroup between August 2006 and September 2010.
Prosecutors allege that together with employees from institutions including UBS, Citigroup, Royal Bank of Scotland (RBS.L), Deutsche Bank (DBKGn.DE), JPMorgan Chase (JPM.N), HSBC (HSBA.L), Rabobank and interdealer brokers ICAP (IAP.L), Tullett Prebon (TLPR.L) and RP Martin, Hayes conspired to defraud.
Hayes spoke only to confirm his name and address and that he understood the charges against him. He was granted bail on condition that he does not leave or attempt to leave the UK and was ordered to appear at the higher Southwark Crown Court on July 4 for further proceedings.
Hayes joined Swiss bank UBS in Tokyo in 2006, becoming a senior trader of interest-rate derivatives indexed to yen-denominated Libor. In late 2009, he left UBS to join Citigroup in Tokyo. He left the U.S. bank less than a year later.
Charges against him include conspiring with others "to defraud in dishonestly seeking to manipulate yen London interbank offered rates and other interbank offered rates ... with the intention that the economic interests of others would be prejudiced and/or to make personal gain for themselves or another."
In a statement after the hearing, ICAP said although an unnamed employee at one of its global subsidiaries had been referred to in one of the charges against Hayes read out in court, no ICAP company had been charged.
"ICAP has provided information to the SFO (Serious Fraud Office) and continues to cooperate with its investigation," it said.
Dutch Rabobank also reiterated it was cooperating with global investigations and that it would defend itself against civil litigation pending in the U.S. The bank said in February it expected to settle allegations of interbank rate rigging with U.S. and UK regulators.
Tullett Prebon said it was cooperating with UK authorities, adding that it had not been informed that it or its brokers were under investigation.
RP Martin, UBS, Citigroup, Deutsche Bank, JPMorgan, HSBC and RBS declined to comment.
The SFO has been under pressure to launch proceedings against Hayes since he was charged by the U.S. Department of Justice with conspiracy, wire fraud and an antitrust violation last December.
The SFO, a cash-strapped agency that narrowly avoided being scrapped in 2011, would have faced severe criticism had U.S. prosecutors extradited Hayes, a Briton, before he faced UK justice.
British politicians have said a UK trial for British Libor suspects will help show the UK justice system is as capable of tackling white-collar crime as its U.S. counterpart.
Having named some of the world's largest banks and brokers in its charges, lawyers say the SFO is now under increasing pressure to make more prosecutions.
"Without further prosecutions, now that a number of financial entities have been named in court, it is inconceivable to think that the public faith in Libor and the UK financial system as a whole will be fully restored," said James Carlton of law firm Fox Williams, who is not involved in the case.
($1 = 0.6407 British pounds)