Supreme Court Rules City Traders’ Fraud Convictions Unsafe
In the recent case of R v Hayes; R v Palombo [2025] UKSC 29, the Supreme Court quashed the convictions of bankers Tom Hayes and Carlo Palombo, finding both unsafe as the result of serious flaws in their respective trials.
Both bankers had previously been convicted and imprisoned, in separate proceedings, for conspiracy to defraud relating to activity involving the London Inter-Bank Offered Rate (Libor) and Euro Interbank Offered Rate (Euribor).
The Supreme Court noted that, whilst there was ample evidence for conviction, the juries in both cases had been unfairly directed, leading to them acting as instructed. It appears that nine other convictions may now have to be reviewed.
Nazaqat Maqsoom of KANGS comments on this case.
The Background
Tom Hayes, a former trader at UBS and Citigroup, was convicted in 2015 and sentenced for conspiring to manipulate LIBOR. Carlo Palombo was convicted in 2019 and sentenced for similar conduct involving EURIBOR. Both were accused of influencing rate submissions to benefit their trading positions, allegedly disregarding the proper basis for those submissions and thereby intending to prejudice the economic interests of others.
Both convictions were upheld by the Court of Appeal, which endorsed the trial Judges’ directions that any submission influenced by trading advantage could not be considered genuine or honest.
Following referral by the Criminal Cases Review Commission, the Supreme Court reconsidered the legality of the convictions.
The Offence of Conspiracy to Defraud
Conspiracy to defraud is a common law offence which occurs when two or more people agree to act dishonestly together, either to deprive another person of their property or rights or cause them financial loss.
The mere intention to defraud together with an agreement to act suffices. The intended fraudulent act does not have to be committed.
The Supreme Court Decision
The Market Trading Issues
In this highly technical case, the central banking issue was whether a rate submission influenced by trading advantage could be deemed false or misleading, and whether the submission must reflect the single cheapest borrowing rate available to the bank.
In a judgment delivered by Lord Leggatt, the Supreme Court answered both questions in the negative. The Court held that the definitions of LIBOR and EURIBOR required banks to submit the rate at which they could borrow funds at a given time. An important point was that this was not a mechanical calculation but a subjective assessment involving a range of legitimate borrowing rates. As such, the submission was inherently a matter of opinion.
The Court emphasised that a rate submission is only false or misleading if it does not reflect the submitter’s genuine opinion. Whether a submission was dishonest is a question of fact for the jury, not a matter of law for the judge.
The Unsafe Convictions
Whilst the Supreme Court commented that, had the Judges directed the Jurors properly, the convictions may have stood. The simple fact is that mistakes had been made by instructing jurors incorrectly, thereby removing their role which undermined the fairness of the Trials.
At a time when Sir Brian Leveson is suggesting the removal of Jury Trials for defendants in fraud cases of this nature and replacing them with Judge only Tribunals, the significance of the Supreme Court’s comments in this matter may well receive considerable debate in the future.
The implications for financial regulation and criminal law
This ruling has profound implications for the prosecution of financial crime. It clarifies that subjective judgments in financial submissions cannot be criminalised solely on the basis of motive or commercial benefit. The decision reinforces the principle that criminal liability must be grounded in demonstrable dishonesty, assessed by a properly directed jury.
For regulators and prosecutors, the judgment signals the need for greater precision in distinguishing between unethical conduct and criminal fraud. While regulatory breaches may still arise from rate manipulation, the threshold for criminal conviction is now more clearly defined. The ruling also underscores the importance of jury autonomy in complex financial trials, particularly where expert evidence and market practices are involved.
How Can We Assist?
KANGS has been advising and guiding clients facing allegations of involvement in criminal fraud investigations of every nature for many years.
We understand that facing a FCA investigation for alleged breaches of FCA regulations can be daunting. Our experienced solicitors have a successful record of defending a wide range of cases, including insider trading, market manipulation, investment schemes and conflicts of interest.
The team at KANGS has earned a nationwide reputation for the excellence in financial crime and white collar crime, as recognised by the leading legal directories Chambers UK and The Legal 500. If we can be of assistance, our team would be delighted to hear from you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
Top ranked by leading legal directories Chambers UK and the Legal 500.
