Judges cite unfair jury directions and flawed indictments in quashing City traders’ fraud convictions
In a stunning legal reversal, the UK Supreme Court today quashed the fraud convictions of two former City traders, Tom Hayes and Carlo Palombo, after unanimously finding that their trials were marred by unfair and inaccurate directions to the jury.
The decision marks the collapse of the UK’s most high-profile prosecutions in the LIBOR and EURIBOR manipulation scandal that rocked global financial markets over a decade ago.
Tom Hayes, 44, once a trader at UBS and Citigroup, was the first person to be jailed in connection with manipulating the London Inter-Bank Offered Rate (LIBOR). Convicted in 2015 on multiple counts of conspiracy to defraud, he served over five years of an 11-year sentence. Carlo Palombo, 45, formerly of Barclays, was convicted in 2019 for conspiring to rig the Euro Interbank Offered Rate (EURIBOR) and handed a four-year sentence.
Both men have consistently denied wrongdoing.
Their convictions were referred back to the courts in 2023 by the Criminal Cases Review Commission following a pivotal decision in the United States. A US appeals court had overturned similar convictions there, and US authorities subsequently dropped outstanding charges against Hayes.
The UK Court of Appeal initially upheld the convictions last year but acknowledged that the cases raised a point of law significant enough to warrant review by the Supreme Court. That review has now delivered a damning verdict on the handling of both trials.
Lord Leggatt, delivering the unanimous judgment, said the indictment in Hayes’ case lacked the clarity necessary for a fair trial. “Regrettably, the indictment did not give sufficient particulars to enable the defence and the trial judge to know clearly and precisely the nature of the prosecution’s case,” he said. “Had it done so, the problems which have beset this case might have been avoided.”
Embed from Getty ImagesThe court found that the trial judges had overstepped by treating questions of fact as matters of law, thereby taking key decisions out of the hands of the jury.
“Directions conflated whether a submission complied with the LIBOR definition and whether it reflected a genuine opinion,” Lord Leggatt said. “This usurped the jury’s function and undermined the fairness of the trial.”
The Supreme Court also criticised the Court of Appeal for dismissing the widely accepted principle that LIBOR and EURIBOR submissions typically fell within a range of plausible rates.
Turning to Palombo’s case, the judgment noted that flaws in the jury directions meant it could not safely be assumed the jury would still have convicted him. “His conviction also cannot stand,” the court ruled.
Standing outside the Supreme Court, Hayes and Palombo appeared visibly relieved. Their legal teams described the judgment as a long-overdue vindication.
The Serious Fraud Office (SFO), which led the original prosecutions, said in a statement: “We have considered this judgment and the full circumstances carefully and determined it would not be in the public interest for us to seek a retrial.”
The judgment effectively closes the chapter on the UK’s prosecution of traders for manipulating interbank lending rates—a once-explosive scandal that resulted in billions in fines for major banks and called into question the integrity of the global financial system.
But it also raises serious questions about the judicial handling of complex financial crime cases and could prompt further scrutiny of how such prosecutions are built and presented.
