On 18th June the SFO charged a UBS trader, Tom Hayes, in connection with its LIBOR investigation. This is the most significant development hitherto in its massive investigation. Last December the SFO arrested Mr Hayes and two others and so its decision six months later to only prosecute him indicates that in connection with his alleged criminality no one else will be charged. It is not yet apparent why these others are not being prosecuted; probably either insufficient evidence or they have both been granted immunities in return for them agreeing to become prosecution witnesses.

The SFO according to its press release is alleging that Mr Hayes was a member of eight separate  conspiracies to manipulate LIBOR. Whilst the details of these allegations are yet to be released, the SFO having decided to withhold these until his first court appearance, it is striking that despite the SFO contending the existence of eight criminal agreements only Mr Hayes has been selected for prosecution. Whilst it is possible that others might later also be charged, the SFO like any prosecutor normally decides who to prosecute at the same time and then charges or summonses everyone at around the same time. So unless within the next day or so there are further SFO announcements, it seems that Mr Hayes will enter the dock alone to face allegations that he conspired with a large number of other persons all of whom the SFO has decided not to prosecute.

Another curious feature is the SFO’s decision to avoid alleging that Mr Hayes committed offences contrary to the Fraud Act but instead to opt for the common law offence of conspiracy to defraud which the Act was intended to replace. Indeed extant guidance issued by the Attorney General discourages use of this offence except in exceptional circumstances. So it seems that the SFO have decided that there is no statutory or other offence other than this which incriminates LIBOR manipulation. As I have contended [in Solicitors Journal, July 2012] reliance on this conspiracy offence is probably the SFO’s only option but that this carries huge risks for it.

There is of course the omnipresent American angle. There are two aspects of it which seem relevant. Last December the US Justice Department (DoJ) announced that it wished to indict Mr Hayes for various alleged conspiracies all also concerning LIBOR manipulation. In contrast however it named and similarly indicted an alleged co-conspirator, Roger Darin. Following that announcement the DoJ asked the UK to extradite Mr Hayes. The effect of the SFO’s decision to also charge him is to stymie that request as s12 of the Extradition Act bars extradition in this situation. What is unclear is whether the SFO has acted in concert with the DoJ, the two having recently reached a secret deal that Mr Hayes should only face a LIBOR-related prosecution in London, or whether instead the SFO has thwarted the DoJ. The latter seems more likely.

Secondly the DoJ has published its indictment and so we already know what is alleged by it against Mr Hayes. According to this he worked for UBS as a SWAPS trader and was never a LIBOR submitter. If the SFO’s case is consistent it is significant that no UBS submitter, the employee who would have submitted the allegedly false information, is being prosecuted.

The SFO has decided to focus its first LIBOR prosecution on UBS. There are of course plenty of other banks who are implicated in the alleged manipulation of the benchmark. We’ll have to see whether this prosecution is a harbinger for a series of others. If so then the SFO’s strategy must be that it should be the guinea pig where the law is to be tested to determine whether LIBOR manipulation is a crime.