The Rest Is Money 198. The Trader Who Paid For The Financial Crisis
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Aug 13, 2025 Tom Hayes, a former trader at UBS and Citigroup, shares his dramatic journey through the LIBOR scandal after being convicted for market manipulation. He discusses the complexities of trading during a financial crisis and the importance of LIBOR in the global economy. Hayes also reveals emotional insights into navigating the legal system following his conviction, the challenges of financial benchmarking, and the harsh realities of proving innocence. His story sheds light on issues of accountability and the personal toll of white-collar crime.
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Huge Profits From LIBOR-Linked Trading
- Tom Hayes explains he made about $300m for UBS trading Japanese interest-rate derivatives.
- He says he executed roughly 28,000 LIBOR-linked trades, mostly with other banks.
What LIBOR Actually Measured
- LIBOR was a survey-based estimate of the interbank borrowing rate at 11am, formed by trimming extremes and averaging the middle submissions.
- The published LIBOR reflected a panel view of a prime bank's cost of borrowing for a currency and term.
LIBOR Moves Affect Derivative P&L
- Derivatives like swaps reference LIBOR, so daily LIBOR movements change the mark-to-market profit or loss on traders' books.
- Traders therefore had a direct commercial interest in how the benchmark was set on any given reference date.