Three men arrested in Libor rigging inquiry

The SFO opened its investigation into Libor manipulation in July after Barclays was fined £290 million by US and UK regulators

The Serious Fraud Office has made its first arrests in connection with a wide ranging probe into attempts by City traders to fix Libor interest rates.

Three British men were held after UK’s top fraud busting agency, working with City of London Police, executed search warrants at two homes in Essex and one in Surrey.

The three are understood to be Thomas Hayes, who has worked at several institutions including UBS and Citigroup, along with Terry Farr and Jim Gilmour. The latter pair are understood to work for RP Martin, a broker which facilitates trading between banks and other financial firms.

The SFO would only say that three men, aged 33, 41 and 47, were taken to a London police station in the early morning after the three properties were searched.

Libor is used to price a huge range of financial contracts, including some mortgages. It is based on an average of the rates at which various banks on a panel say they expect to pay to borrow moeny from other banks. There is a different panel for each currency.

Mr Hayes was a trader specialising in Yen, the Japanese currency. As brokers, the other two would have been in a position to pass messages between traders at different banks.

None of the firms the men worked for were prepared to comment yesterday.

The Libor scandal has now seen scores of traders across the City either disciplined or suspended or fired. 

The three men arrested aren’t directly connected to Barclays. News of its £290m settlement with regulators on both sides of the Atlantic earlier this year was what exposed the scandal.

Lurid e-mails, one of which saw a trader promising bottles of Bollinger to a colleague for attempting to fix Libor rates, were published by watchdogs which severely embarrassed the bank and ultimately led to the resignations of both its chairman Marcus Agius and its chief executive Bob Diamond.

Barclays investment banking chief Rich Ricci recently told MPs that five traders had been fired and another 13 disciplined as a result of the scandal.

The public fury over the revelations is thought to have delayed other banks from settling with watchdogs amid concern over the possible public reaction to the activities of their traders.

UBS, which has for some time been co-operating with regulators after in effect turning “state’s evidence”. It is expected to agree a penalty soon, possibly before the New Year in an attempt to draw a line under its role in the scandal. 

According to Reuters Mr Hayes has been named court documents filed by the Canadian Competition Bureau which allege that he persuaded two Royal Bank of Scotland traders in London, Brent Davies and Will Hall, to manipulate yen Libor, rates.

Mr Hayes worked at UBS from 2006 to 2009 before later moving to Citigroup where he remained until 2010. The documents also allege that he contacted traders at other banks.

The alleged involvement of the two men from RP Martin, however, did raise some eyebrows. The employee owned firm is known as a traditional City operation. “They take you to lunch and you agree to trade with them is basically how it works,” said one City source. “They’re very old school.”