How did authorities zero in on Tom Hayes, the disheveled, socially awkward mastermind of the Libor scandal? An excerpt from David Enrich's new must read book ‘The Spider Network’

A Trap for a Trader

On a mild, damp March afternoon in 2011, Sarah Tighe and her husband Tom Hayes arrived in the prenatal wing of London’s University College Hospital. They were there for Ms. Tighe’s 12-week pregnancy scan.

The pregnancy was off to a difficult start. Ms. Tighe had suffered from severe morning sickness. Mr. Hayes, a disheveled, mildly autistic 32-year-old mathematician, hadn’t been helping matters. He didn’t seem especially concerned with her discomfort. Instead he was preoccupied with his favorite British soccer team, Queen’s Park Rangers, and his firing months earlier from Citigroup, which had accused him of trying to manipulate an important interest rate called Libor.

Rebuffed by several other banks where he’d sought jobs, Mr. Hayes was slowly coming to terms with the fact that his career as a wildly successful trader had come to an end. More troubling, he’d heard rumors that governments were investigating his conduct.

As a midwife moved an ultrasound wand over Ms. Tighe’s growing midsection, Mr. Hayes’s cellphone rang. The call was from a number—and country code—that he didn’t recognize. Anxiously lying on an examination table, Ms. Tighe told her husband to ignore the call.

Mr. Hayes stood up, walked out of the room and answered the phone.



Tom Hayes in July 2013 Photo: Euan Cherry/UPPA/ZUMA PRESS

The authorities were hunting for bankers to hold accountable for the industry’s many sins, and Mr. Hayes was blundering into an elaborate trap, cementing his status as their top target.

A couple of weeks earlier, on March 11, a violent earthquake had rumbled up from more than 15 miles beneath the surface of the ocean off Japan’s northeastern coast. It shook buildings all over the country, but the worst damage came from the sea. The shifting underwater plates unleashed a tsunami of biblical proportions, with a wall of water 30 feet high bulldozing Japan’s coastal prefectures. Thousands of people would perish.

In Tokyo, Mirhat Alykulov felt the quake and its aftershocks and then watched, awe-struck, as news reports showed the extent of the damage caused by the tsunami. He decided it was time to get out of town. He packed his bags and, without telling anyone, got on a plane to Washington.

Like Mr. Hayes, Mr. Alykulov was in trouble. He had grown up on a chicken farm in Kazakhstan, learned English while in high school in Pennsylvania, gone to college in Tokyo and then, finally, landed a job as a junior trader in the Tokyo office of Swiss bank UBS.

His co-workers had given him the nickname “Derka Derka” because of his hard-to-place accent and Eurasian looks. It derived from a refrain in the deliberately offensive 2004 movie “Team America: World Police.” The “Team America” puppets depicting Middle Eastern terrorists used the phrase “Derka derka Muhammad jihad” instead of speaking actual Arabic. “Ha ha, that’s great,” his boss said when he learned of the nickname.

Mr. Alykulov and Mr. Hayes sat next to each other in UBS’s Tokyo offices, where Mr. Hayes had a reputation as an elite, combustible and obsession-prone trader. (Each day, Mr. Hayes entered the building through a lucky turnstile, often wearing lucky bumblebee socks and toting a lucky keychain.)

Mr. Hayes soon became the younger man’s mentor, teaching Mr. Alykulov the tricks of the trade. Mr. Alykulov did his best to overlook Mr. Hayes’s social awkwardness, which garnered him the nicknames “Rain Man” and “Kid Asperger.” Once, at a dinner party, Mr. Hayes told Mr. Alykulov’s girlfriend all about his dandruff problem; she later sent Mr. Alykulov to work with a bottle of special shampoo to present to Mr. Hayes.

Despite Mr. Hayes’s propensity to explode at colleagues, Mr. Alykulov recognized that he was a brilliant trader. Mr. Hayes, not the best at reading interpersonal cues, concluded that he and Mr. Alykulov were pals.

Mr. Hayes jumped to Citigroup in 2009. After Citigroup fired him the following year, UBS opened an internal investigation into Mr. Hayes’s activities when he worked there. The Swiss bank uncovered evidence of a widespread campaign by Mr. Hayes, Mr. Alykulov and many others—including their managers and some executives—to skew the London interbank offered rate, or Libor. The scheme was designed to increase the profits that the traders reaped from instruments known as interest-rate derivatives whose values were based on Libor.

UBS shared its findings with governments all over the world, which then launched civil and criminal investigations. Before long, authorities in the U.S. had zeroed in on Mr. Hayes as the apparent ringleader.

UBS suspended Mr. Alykulov, although he was still getting paid—that way, the bank could ensure that he and others in similar situations would cooperate with the American officials who were leading the investigations. But his career prospects were in doubt. It was a jarring, embarrassing turn for someone who not long ago had thought he had a bright future as a trader.

After a few glum days lamenting his suspension, Mr. Alykulov started trying to figure out what to do with his life. He decided to learn another language. He set off for a monthslong trip to Spain, keeping in close touch all the while with Nate Muyskens, the tall Washington trial lawyer with a buzzcut whom UBS had hired to represent him. Mr. Muyskens told him that he was eventually going to need to come to Washington to meet with FBI agents and Justice Department prosecutors.

Mr. Alykulov returned to Japan in time for the earthquake—and then left Tokyo in such a blur that he forgot to pack a suit. On the car ride into Washington from Dulles International Airport, Mr. Alykulov stopped at a department store and dropped $500 on a new outfit so that he could look presentable when he showed up at the Justice Department. He charged the suit to UBS—the trip was on behalf of his employer, after all.

By the time he arrived in downtown Washington, Mr. Alykulov had worked himself into a lather. He was convinced that this trip would culminate with him in a jail cell. The easygoing Mr. Muyskens, whose clients ranged from bank traders to Justin Bieber, told him to chill: All that he had to do was cooperate, he explained, and the Justice Department would promise not to prosecute him.

But Mr. Alykulov wasn’t wild about that idea. He knew Mr. Hayes by now was one of the main targets. Mr. Alykulov didn’t much like Mr. Hayes, but he knew his former boss regarded him as a friend. The thought of knifing someone in that situation made Mr. Alykulov a little queasy. Plus, he was genuinely fond of Mr. Hayes’s wife.

When the time came for their appointment at the Justice Department’s Bond Building, Mr. Muyskens had to physically push Mr. Alykulov out the door to walk the few blocks down New York Avenue. When he got there, Mr. Alykulov seemed to have trouble explaining what he’d actually done wrong.

Gradually, though, he overcame his compunctions, telling himself that he had an obligation to UBS and its thousands of employees to help resolve this mess. He spent dozens of hours serving as a much-needed Sherpa for the prosecutors and FBI agents.

Mr. Hayes, Mr. Alykulov told the government investigators, had orchestrated the whole thing. What about current UBS employees and executives? Mr. Alykulov played down their involvement. Mr. Hayes, he made clear, was the mastermind.

As Mr. Muyskens had promised, Mr. Alykulov was granted a nonprosecution agreement that stated that Justice wouldn’t go after him as long as he cooperated fully. All he had to do was help to get the investigators closer to Mr. Hayes.

The FBI agents tried to convince Mr. Alykulov that they hadn’t been able to track down Mr. Hayes’s phone number. Mr. Alykulov would be doing everyone a big favor, they said, by reaching out to his former boss over Facebook to establish contact. The sooner the investigators got in touch with Mr. Hayes, the better it would be for him.

Mr. Alykulov typed out a Facebook message: “We need to talk.” He wrote that the Justice Department wanted to speak with him and that he wanted to get Mr. Hayes’s advice on what to do. Mr. Hayes still hadn’t spoken to any regulators, and he was eager for any scraps of information he could pick up about the course of the U.S. investigations. He sent Mr. Alykulov his cellphone number.



Tom Hayes and his wife arrived at court on Aug. 3, 2015. Photo: Peter Nicholls/Reuters

A couple of days later, the call came during Ms. Tighe’s pregnancy scan. Mr. Alykulov said that he was phoning from Kazakhstan, and FBI agents had devised an elaborate system to make it look like the call was coming from Mr. Alykulov’s native country—hence the long, strange phone number on Mr. Hayes’s screen.

Audio of the call was being recorded and piped live into a room at the Bond Building, where prosecutors and FBI agents sat around a conference table listening. They had prepared a list of questions for Mr. Alykulov to ask Mr. Hayes. The goal was to get him to acknowledge that what he’d been doing was wrong or to make some other sort of incriminating statement—perhaps encouraging Mr. Alykulov to lie or destroy evidence.

Mr. Alykulov—trying to fight back a debilitating sense of anxiety and betrayal and to contain his surging adrenaline—started the call by repeating what he’d said in the Facebook message: Justice wanted to schedule an interview.

“Should I talk to them? What should I tell them?”

“The U.S. Department of Justice, mate, you know, they’re like…the dudes who, you know…put people in jail,” Mr. Hayes answered. “Why the hell would you want to talk to them?”

Ms. Tighe finished her ultrasound. She walked into the prenatal wing’s waiting room, its walls covered with posters featuring cherubic babies and signs barring phone calls. Mr. Hayes was pacing and talking on his cell. Ms. Tighe could tell from his expression—his whole face was screwed up in a confused, agitated look—that something strange was going on.

Mr. Alykulov had just mentioned that he had printed out emails in which Mr. Hayes had asked his subordinate to help move Libor. “What should I do with them?” he asked.

“Why are you printing emails?” Mr. Hayes asked, furrowing his brow. Ms. Tighe started listening carefully to his end of the conversation. They were clearly talking about Libor and the Justice Department. She motioned for him to get off the phone; when that failed, she whispered, urgently, for him to tell Mr. Alykulov not to destroy evidence or to lie. One thing she had learned about Mr. Hayes during their four years together was that if you wanted him to do something, you needed to tell him in direct, unequivocal terms. Subtleties and shades of gray were lost on him. If this was a setup, she didn’t want her naive husband stumbling right into it.

Mr. Hayes complied, then asked Mr. Alykulov whether the Justice Department wanted to talk to him as well as to Mr. Alykulov. Mr. Alykulov said he didn’t know. Mr. Hayes, growing apprehensive about Mr. Alykulov’s carefully worded queries and nervous tone, asked whether he was recording the call.

“I did this, too,” Mr. Alykulov said, referring to his efforts to get Libor moved in favorable directions. “Why would I record it?”

With Mr. Hayes still on the phone, Ms. Tighe took an elevator downstairs to collect the test results that would show whether the fetus was at risk of Down syndrome. She couldn’t believe that she was going through this alone. The results showed virtually no risk of the syndrome. Angry despite the good news, she rode the elevator back up and found Mr. Hayes still on the phone. He was in the process of telling Mr. Alykulov to just blame his managers.

“That’s what I’m going to do,” Mr. Hayes said.

At the Bond Building, FBI agents thought that Mr. Hayes’s suggestion that Mr. Alykulov shouldn’t talk to the investigators might be enough for an obstruction-of-justice charge. A couple of days later, however, they decided to take another shot, hoping for cleaner evidence.

Mr. Hayes was finishing up lunch at the Cuckfield pub in East London with his stepbrother, who worked at a nearby hospital, when his phone rang. The Cuckfield, housed in a 19th-century stone inn, had a beer garden in the back, and Mr. Hayes stood there in the early-afternoon sunshine.

Mr. Alykulov started in with what struck him as a series of leading questions: “Should I tell them about your friend at RBS?” Mr. Hayes had a contact, Brent Davies, who used to work at Royal Bank of Scotland and whose help Mr. Hayes had sought in moving Libor.



Mr. Hayes left Westminster Magistrates Court on June 20, 2013. Photo: Neil Hall/Reuters

“Brent? What’s he got to do with it?” Mr. Hayes asked.

“Should I tell them about your friend at Deutsche?” That was a Deutsche Bank trader named Guillaume Adolph.

“Well, I wouldn’t mention it,” Mr. Hayes said, “but if they ask, you should tell them.” In any case, he added, everything was done in writing, so it wasn’t much of a secret.

The phone call ended. Mr. Hayes and Mr. Alykulov would never speak again.

This piece is adapted from Mr. Enrich’s new book, “The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History,” to be published on March 21 by HarperCollins.