Libor Probe Turns Up Possible Rate-Rigging Ringleader

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Every gang worth its salt needs a ringleader. The James-Younger Gang had Jesse James. The T-Birds had Danny Zuko.

And the Li-Bros, as we've christened the group of Wall Street outlaws who allegedly conspired to rig the massively important interest rate known as Libor, may have had Thomas Hayes.

Regulators and prosecutors have homed in on Hayes, a former trader at UBS and Citigroup whom they believe may have led an effort between a gang of traders to artificially manipulate the yen-denominated version of Libor, according to the Wall Street Journal.

The alleged Hayes ring — which reportedly includes ex–Deutsche Bank trader Guillaume Adolphe, former RBS-ers Brent Davies and Will Hall, former JPMorgan traders Paul Glands and Stewart Wiley, and former HSBC trader Peter O'Leary — is different than the group of ruffians reportedly led by former Barclays trader Philippe Moryoussef that is thought to have colluded to rig Euribor, the Eurozone's version of Libor.

But they were Li-Bros all the same:

Mr. Hayes allegedly worked with the other traders to push submissions up or down for a benchmark interest rate called yen Libor, according to court filings by Canada's competition regulator, which identified him only as "Trader A." The agency said it was told by UBS that Trader A told another trader at Royal Bank of Scotland Group PLC "who his collusive contacts were and how he had and was going to manipulate yen Libor."

Earlier this year, the FT reported that Hayes, who left UBS for Citigroup as a "star hire" in 2009, had come under fire at Citigroup for what colleagues saw as his not-so-slick attempts to manipulate key interest rates:

Mr Hayes had been a big money-maker for UBS, according to people familiar with his employment. Within less than a year, however, both Mr Hayes and [his boss] Mr Cecere had left Citi after they were accused in an internal investigation of attempting to influence yen Libor or the separate Tokyo interbank offered rate (Tibor), according to current and former Citi executives with direct knowledge of the investigation ...

One former senior banker at the US group who was briefed at the time about Mr Hayes’ and Mr Cecere’s actions said colleagues were mystified at what appeared to be an attempt to influence the rate: “It seemed an incredibly dumb thing to do.”

Hayes, who was canned by Citigroup in 2010, is also suspected of trying to bring two brokerage employees — who serve as go-betweens between banks — into the fold.

Reuters reported yesterday that U.S. prosecutors and European regulators are getting their handcuffs ready for a first round of Libor-related arrests. Which means that if they haven't already, Hayes and the rest of the Li-Bros might want to start getting their stories straight.