About the Book
About the Author
Title Page
Cast of Characters
Part I. The Scam
Chapter 1: Watching the Coronation
Chapter 2: The Hall of Mirrors
Chapter 3: Classy People
Chapter 4: Peak Performance
Chapter 5: The Lucky Turnstile
Chapter 6: The Sycophants
Chapter 7: Your Name in Print
Chapter 8: A Yacht in Monaco
Part II. Ascendance
Chapter 9: What’s a Cabal?
Chapter 10: Entre Nous
Chapter 11: Gods of the Sea
Chapter 12: In the Flag Room
Chapter 13: A Slap on the Wrist
Part III. The Second Scam
Chapter 14: He’s the One
Chapter 15: Spiders
Chapter 16: A Crook of the First Order
Chapter 17: The Unit Cost of Steak
Chapter 18: Charades
Part IV. Victory
Chapter 19: Within the Ark
A Note on Sources
About the Author

David Enrich is a veteran writer and editor at the Wall Street Journal. He currently is the Journal’s Financial Enterprise Editor, heading a team of investigative reporters. He previously served as the Journal’s European Banking Editor, based in London. He has won numerous journalism awards, including the 2016 Gerald Loeb Award for his coverage of Tom Hayes and the Libor scandal. A Massachusetts native and a graduate of Claremont McKenna College in California, he lives in New York with his wife and two sons.

Title Page for The Spider Network
Tom Hayes

TOM HAYES: Star trader at a succession of banks

NICK: Hayes’s father

SANDY: Hayes’s mother

ROBIN: Hayes’s younger brother

PETER AND BEN O’LEARY: Hayes’s stepbrothers

SARAH TIGHE: Lawyer who eventually marries Hayes


Royal Bank of Scotland (RBS)

BRENT DAVIES: Hayes’s mentor, later an ICAP broker

PAUL WHITE: Libor submitter

NEIL DANZIGER: Party-loving trader

SARAH AINSWORTH: Trader; Hayes’s girlfriend; later, Crédit Agricole trader


MIKE PIERI: Trader and manager who hires Hayes in Tokyo

MIRHAT ALYKULOV: Junior trader, nicknamed “Derka Derka”

ROGER DARIN: Trader and Libor submitter who becomes Hayes’s nemesis

YVAN DUCROT: Executive aligned with Darin

NAOMICHI TAMURA: Trader and manager

SASCHA PRINZ: Risk-loving trader and executive

CARSTEN KENGETER: Co-head of investment banking division

ALEX WILMOT-SITWELL: Co-head of investment banking division

PANAGIOTIS KOUTSOGIANNIS: Trader known as “Pete the Greek”


ANDREW SMITH: Trader and Libor submitter


CHRIS CECERE: Trader, Hayes’s boss

BRIAN MCCAPPIN: Karaoke-loving CEO of Japanese investment bank

HAYATO HOSHINO: Trader in London tasked with helping Hayes

ANDREW MORTON: Senior investment banking executive

ANDREW THURSFIELD: Libor submitter and manager in London

LAURENCE PORTER: Libor submitter, Thursfield’s underling

BURAK CELTIK: Libor submitter, Porter’s underling

Deutsche Bank

GUILLAUME ADOLPH: Trader, nicknamed “Gollum”

DAVID NICHOLLS: Trading manager

MARK LEWIS: Executive who talks with Hayes about possible job

Other Banks

ALEXIS STENFORS: Hotshot trader at Bank of America Merrill Lynch

PAUL ROBSON: Rabobank trader and Libor submitter, nicknamed “Pooks”

STUART WILEY: J.P. Morgan trader


MILES STOREY: Barclays Libor official

PAUL ELLIS: Credit Suisse trader

Darrell Read, Noel Cryan, Colin Goodman, Terry Farr, Danny Wilkinson, and Jim Gilmour


DARRELL READ: Broker renowned for his university degree and large nose

COLIN GOODMAN: Broker who sends out influential Libor “run-throughs”

DANNY WILKINSON: Red-faced broker and manager

FRITS VOGELS: Manager in London


DAVID CASTERTON: Spencer’s right-hand man, nicknamed “Clumpy”

ANTHONY HAYES: Broker at Tokyo affiliate, nicknamed “Abbo”

RP Martin

TERRY FARR: Happy-go-lucky, motorcycle-crashing broker

JIM GILMOUR: Down-on-his-luck broker

LEE AARON: Broker, nicknamed “Village”

CLIFF KING: The three brokers’ manager

DAVID CAPLIN: CEO, nicknamed “Mustard”

Tullett Prebon

NOEL CRYAN: Amateur boxer, broker

MARK JONES: Party animal, broker

NIGEL DELMAR: Broker, Hayes’s best friend in Tokyo

DANNY BRAND: Broker in Hong Kong

ANGUS WINK: Senior executive


Bank of England


CHRIS SALMON: Senior official

British Bankers’ Association (BBA)


JOHN EWAN: Official in charge of Libor

U.S. Commodity Futures Trading Commission (CFTC)


DAVID MEISTER: Head of enforcement division

STEPHEN OBIE: Enforcement official

VINCENT MCGONAGLE: Enforcement official

GRETCHEN LOWE: McGonagle’s deputy

U.S. Justice Department

DENIS MCINERNEY: Head of fraud division

ROBERTSON PARK: Lawyer in fraud division

WILLIAM STELLMACH: Lawyer in fraud division

SCOTT HAMMOND: Lawyer in antitrust division

U.K. Financial Services Authority (FSA)

MARGARET COLE: Head of enforcement

PATRICK MEANEY: Investigator

U.K. Serious Fraud Office (SFO)


MATT BALL: Investigator

The Lawyers

LYDIA JONSON: Hayes’s lawyer, from Fulcrum Chambers

IVAN PEARCE: Hayes’s lawyer, from Fulcrum Chambers

STEVEN TYRRELL: Hayes’s U.S. lawyer (previously at Justice Department)

GEORGE CARTER-STEPHENSON: Hayes’s barrister before his trial

NEIL HAWES: Hayes’s barrister during his trial

MUKUL CHAWLA: Barrister representing the SFO

JEREMY COOKE: Judge presiding over Hayes’s trial

GREGORY MOCEK: Barclays lawyer (previously at CFTC)

GARY SPRATLING: UBS lawyer (previously at Justice Department)


The small Japanese ski resort town, nestled in the mountains outside the city of Karuizawa, was a popular destination for day trips for Japanese families. Bustling during the day, it was mostly quiet this Saturday night. Clouds cloaked the moon.

A chartered bus pulled up outside a bar, its windows aglow. A light snow was falling. Out into the peaceful evening stumbled dozens of rowdy bankers, some toting tall cans of Asahi and Kirin. Most of them were drunk. They quickly took over the small bar.

The drinkers were employees of the American bank Citigroup, one of the world’s largest and most troubled financial institutions. A year earlier, at the beginning of 2009, American taxpayers had finished pumping a staggering $45 billion into Citigroup to bail out the collapsing behemoth. Now the transfused recipient was treating dozens of its investment banking employees to a weekend getaway. The bankers were housed nearby in a sprawling luxury hotel, each employee’s room designed in Japan’s typical spare style.

These festivities weren’t so spartan. The point was to foster camaraderie, and that was happening in spades. The party had begun on the hundred-mile ride on the bullet train out from Tokyo. After a day of hitting the slopes, Citigroup ferried the bankers to a bowling alley, where they drank and bowled and drank some more. Their bus had then deposited the intoxicated crew at this bar, before leaving the partyers behind to fend for themselves.

One of the fiesta’s ringleaders was a wiry, curly-haired American named Chris Cecere. You wouldn’t know it from his behaviour now, but he was one of the sharpest people in Tokyo’s cutthroat financial markets. A foul-mouthed veteran of the doomed Wall Street firm Lehman Brothers, Cecere (pronounced CHECK-er-ay) had only worked in Japan for a year or so, but he had quickly assembled a team of rock-star traders. His mandate was to push the already risk-hungry Citigroup into brave new financial frontiers.

That wasn’t all Cecere was pushing. This snowy night, he was practically pouring shots down the throat of his subordinate, a dishevelled British thirty-year-old named Tom Hayes. Slim and nearly six feet tall, Hayes was a brilliant mathematician, one of the most prolific aggressive traders in Tokyo, if not the world. As with Cecere, he didn’t look or act the part. Bespoke suits and expensive shoes were found nowhere in his wardrobe. Specks of dandruff dusted his shoulders. He was far happier with a glass of orange juice or a mug of hot chocolate than a pint of beer, a preference that once earned him the nickname “Tommy Chocolate.”

Hayes found social situations uncomfortable to the point of painful—this one included. Before departing for the ski weekend, he had grumbled to his fiancée that he didn’t want to go. She told him he didn’t have a choice. Hayes’s life revolved around work, and Citigroup was his new family. He had only started there a couple of months earlier, and it was important that he make a good impression on his colleagues. So far, he was off to a promising start in that regard. His new bosses bathed him in praise, introducing him around Citigroup’s global organisation as their newest trophy asset. Only hours before they showed up at the bar, a top Citigroup executive, Brian Mccappin, had described Hayes as “a star” who represented the future of the firm’s enormous business in Tokyo. Mccappin proclaimed that their division would further shift its trading approach to take advantage of their new hire’s extraordinary talent. Hayes was certainly being paid like a star. After years of feeling like he was getting stiffed by six-figure payouts at his former employer, the Swiss bank UBS, he had pocketed a roughly $3 million cash signing bonus when he joined Citigroup.

Mccappin, the CEO of Citigroup’s investment bank in Japan, came along to the bar that night, along with Cecere and Hayes. A native of the gritty English city of Birmingham, Mccappin was tall, with a chubby, dimpled face. A talented singer at thirteen, he and a friend had formed a band called Deadline that sometimes performed at a pub frequented by workers, including Mccappin’s father, emptying out of a nearby Rolls-Royce plant. After Deadline split, some of its members went on, years later, to form Ocean Colour Scene, which briefly rose to fame touring with Oasis. By then Mccappin had moved on to other things, but that didn’t stop him from occasionally claiming that he’d been a founding member of the infinitely more familiar band.

At the time Hayes arrived at Citigroup, the main outlet for Mccappin’s stymied musical ambitions was karaoke, and he was a frequent and enthusiastic practitioner. As Mccappin belted out tunes this night, Hayes grudgingly accepted shot after shot of Jägermeister from Cecere. He struggled to swallow the sweet herbal concoction, fighting an increasingly powerful gag reflex. But he kept throwing the shots back, unwilling or unable to withstand Cecere’s schoolboy pressure. Hayes didn’t want to disappoint his boss. The earlier part of the day had been easier: Hayes was an expert skier, who embraced risk as eagerly on a black-diamond trail as he did on a frenzied trading floor, and he thrived in the deep powder of the Karuizawa resort. Now, though, beads of sweat started tingling on his scalp. The room began to spin. Hayes staggered to the bathroom and vomited. Then he rejoined the party.

Three years later, in January 2013, I was sitting on a sofa in my cramped apartment in London’s Clerkenwell neighbourhood. Centuries earlier, the area had been the stomping ground of knights who were about to embark on crusades to the Holy Land. In a nod to that history, the narrow alleyway that my wife and I shared with a Belgian beer hall was named Jerusalem Passage. The neighbourhood had been repopulated by trendy design studios, sushi bars, and art galleries.

It was just after 8 P.M. when my iPhone buzzed with a text message from a number I didn’t recognise. “I’ll meet you tomorrow but I need to be certain I can trust you,” the text read. “This goes much much higher than me and a lot of what I know even the DOJ [Justice Department] is in the dark.”

The message was from a terrified, and very sober, Tom Hayes.

Less than two months before Hayes contacted me, the attorney general of the United States had stood at a lectern in Washington, D.C., and announced criminal fraud charges against Hayes, branding him as a greedy, deceitful trader who had ripped off countless innocent victims in order to enrich himself. Here, the planet’s most powerful cop declared, was the mastermind of a sprawling, multibillion-dollar scam.

Spread out across time zones and continents, a group of bankers, brokers, and traders had tried to skew interest rates that served not only as the foundation of trillions of dollars of loans, but also as an essential vertebra of the financial system itself. It all boiled down to something called Libor: an acronym for the London interbank offered rate, it’s often known as the world’s most important number. Financial instruments all over the globe—a volume so awesome, well into the tens of trillions of dollars, that it is hard to accurately quantify—hinge on tiny movements in Libor. In the United States, the interest rates on most variable-rate mortgages are based on Libor. So are many car loans, student loans, credit card loans, and on and on—almost anything that doesn’t have a fixed interest rate. The amounts that big companies pay on multibillion-dollar loans are often determined by Libor. Trillions of dollars of exotic-sounding instruments called derivatives are linked to the ubiquitous rate, and they have the ability to touch virtually everyone: Pension funds, university endowments, cities and towns, small businesses and giant companies all use them to speculate on or protect themselves against swings in interest rates. If you bought this book with a credit card, you quite possibly brought Libor into it. So, too, if you drove to the bookshop in a car not yet paid off—or if you’re carrying a mortgage or student loans, or if your town borrowed money to pave its roads, or if you work for a company that issues debt. So if something was wrong with Libor, the pool of potential victims would be vast. As it turned out, something wasn’t wrong with Libor; everything was.

Hayes didn’t come up with the idea of manipulating Libor to turbocharge his profits. But during the course of his career, he took the practice to fantastic new heights, oblivious to or uninterested in the fact that he was engaging in unethical activity with the real potential to harm unsuspecting victims. That initially helped catapult the nerdy trader into the upper echelon of the most profitable industry on earth. By the time I met him, it had thrust him into the crosshairs of regulators and prosecutors on three continents, who were yearning to find someone to hold accountable for the mass destruction that the banking industry recently had inflicted on Western economies.

I had spent nearly a decade writing about banks and their misadventures for the Wall Street Journal and other publications. But this was a misadventure like none other. On the surface, it wasn’t the most eye-catching scandal—which is the very reason it was so easy to pull off. The conspirators were fiddling on the margins with something that few people paid much attention to. But the stakes were so high that even small-scale tinkering had the capacity to spawn fat profits—to the tune of tens if not hundreds of millions of dollars—with commensurate losses afflicting the often-unsophisticated victims.

But the hunt to nab Hayes and his confederates—a group that one participant dubbed the “spider network”—exposed far more than a scheme to manipulate the underpinnings of modern banking. I began to see the saga as rooted in a corrupt, broken financial system, as well as the minimalist, see-no-evil regulatory infrastructure that theoretically was supposed to keep the industry in check. Hayes’s moral compass certainly was skewed—perhaps in part due to the mild case of autism he was eventually diagnosed with, which helped explain his incompetence at human relations and his affinity for numbers over people. But just about everyone I encountered suffered from a version of the same defect: obsessed with numbers and profits, eager to use other people as tools for self-advancement, convinced that anyone on the losing end wasn’t so much a victim as a sucker who deserved whatever mistreatment he got. And the more I dug, the more it seemed that, at least in some ways, Hayes himself was that sucker, the hapless guy positioned to take the fall for an entire industry’s era of anarchic, reckless behaviour. His odyssey, as well as the institutions and individuals that goaded him along, reveals a lot about why the banking industry has become synonymous with scandal—and why, even today, its awful reputation remains firmly intact.



The Brackenbury Primary School, in the dumpy west London neighbourhood of Shepherd’s Bush, was in a three-storey, redbrick Victorian-era building. From outside, the school looked grand. Inside, it was a different matter: High ceilings created a cavernous, intimidating vibe, paint was peeling from the walls, and cold air draughted in through ragged insulation. The small campus, just down the street from the Goldhawk Road Underground station, was in a part of London marked by tracts of similar-looking, century-old houses and down-on-their-luck convenience shops, pubs, and launderettes. Brackenbury’s student body, drawn from the surrounding neighbourhoods, was primarily working class.

In 1990, one of the school’s students was Tom Hayes. The ten-year-old was big for his age, with a mop of sandy blond hair and small dark eyes. He was burning with anger. It was hard to pinpoint the exact reason. His parents had split up six years ago after his mother, Sandy, caught his father, Nick, cheating. Hayes detested Nick’s absence from his life. Nor was he thrilled that upon his father’s remarrying in 1989, Tom and his younger brother, Robin, had inherited two stepsisters from Nick’s new wife, as well as a baby halfsister. But Nick wasn’t the only issue. Hayes sometimes felt Sandy could be controlling and seemed more devoted to her job than to mothering her two sons.

Money was tight. Once, before his parents divorced, angry debt collectors showed up at their small, two-floor brick house in Shepherd’s Bush after Nick, a ponytailed television journalist, fell behind on the utility bills. Hayes told himself that when he grew up, he’d make enough to ensure that the bailiffs never returned. Every day, he counted his money, which he had earned doing odd jobs around the neighbourhood. He stacked the coins by denomination. He memorised the quantities. The rituals made him feel safe. He started carting around all his essential belongings in his backpack, as if ready to flee if the need suddenly arrived.

Sandy worked as a researcher for Gordon Brown, a jowly, Scottish politician in Britain’s Labour Party. She toiled long hours, delegating child-rearing duties to a series of au pairs. Hayes perceived her as anxious, angry, and strict. Among her rules: Hayes was only allowed to drink water. To say their relationship was contentious would have been an understatement. Once, in a fit of rage, she hurled a hot baked potato at Hayes. After another fight, Hayes locked his mother in the cellar. Another time, he flung a saucepan at her head. He threw violent tantrums. (Sandy was not his only target. He once assaulted his stepbrother, who came along with Sandy’s new husband, Tim, with a pool cue.) “The au pairs couldn’t cope,” she would later tell a psychiatrist.

Hayes was desperate to win his mother’s favour. The only way to do that, as far as he could tell, was to excel at school, so that’s what he set out to do. By the time he was six, he was already emerging as a standout maths pupil. (Once, he badgered Sandy to buy him a maths workbook as a gift.) “Tom is a mature and sensitive boy who gets emotionally upset at times due to family problems,” a teacher wrote in a 1987 review that was sent to his parents. “His anger and frustration, and particularly his aggressive will to win, have frequently got him into trouble in the playground and with his peers, though he has calmed down recently.”

As confident as Hayes was when it came to maths, that’s how dysfunctional he was interacting with his peers, especially girls. He could hardly work up the guts to talk to them. He kept track of his number of friends at any given time; he rarely counted more than three and almost never saw them outside of school. Part of the problem might have been his demeanor. Endlessly teased for his attire (Brackenbury didn’t have a strict dress code, but Hayes nonetheless routinely showed up wearing a blazer), he won a dubious award from his peers for “best uniform” of the year. “Tom can sometimes come across as arrogant about his abilities,” a teacher wrote in 1992. “He should appreciate the value of diplomacy!” his English teacher said on another occasion. Hayes acknowledged the problem: “I need to improve my attitude in that I respect ideas I disagree with,” he wrote in a self-assessment.

Buffeted by strife at home and unpopular at school, it wasn’t surprising that Hayes sought refuge in things he could easily understand. From his bedroom window, he could see the floodlights over Loftus Road, the stadium that was home to the Queens Park Rangers professional football team. When QPR scored, Hayes could hear the crowd roar. The sport became a lifelong passion, and for years he attended every home and away game that the Rangers played. He saw QPR as a second family.

And Hayes became obsessed with collecting things. He stock-piled used train tickets. He built a vast army of toy metal soldiers. He amassed dozens and dozens of football stickers, which he arranged in particular orders. His purest love, though, was mathematics. He cherished the simplicity, the objectivity of numbers. They never lied, they never disappointed you, unlike so many people in his life. You couldn’t misinterpret numbers—a valuable quality for a literal-minded boy like Hayes. Equations were beautiful, not to mention reliable: Marriages could fail, friends could fight, girls could ignore you, and QPR could (and often did) lose, but the square root of nine was always three, the angles of a triangle always added up to 180 degrees.

That fed a budding interest in finance. It was partly because Hayes had an intuitive understanding for numbers; he wasn’t scared of them the way many kids were. Another factor was his paternal grandfather. Raymond Hayes had been a stockbroker for an old firm, Mullens & Company, in the City of London, as the capital’s financial district is known. Raymond’s nickname at work had been “Talkie” because he was such a blabbermouth, and he loved gabbing to his attentive grandson. Raymond trained Hayes to read the tiny newspaper columns of daily stock price movements, instructing him to search for patterns, and he entertained Hayes with colourful stories, some of which might have been apocryphal, about his days of traipsing into the City wearing a shiny, black top hat. A favourite tale involved Queen Elizabeth II’s coronation in 1953. Raymond wanted to watch the ceremony, but he didn’t own a TV or have the money to buy one. He told his boss, who advised him to buy shares of a specific company. Raymond bought the shares. They immediately rallied. The next day, he unloaded the shares, pocketing enough money to buy his TV and watch the coronation. (Insider trading didn’t become a crime in England until 1985. During Raymond’s heyday, the practice was rife.) Decades later, a watercolour painting of the ornate Mullens headquarters would hang in Hayes’s living room—a gift from Raymond before he died in 2000.


Just as Hayes was getting into a groove at school, Sandy and Tim, a management consultant, decided it was time to escape dirty urban living in favour of Winchester, a town in the English countryside best known for its medieval cathedral. Hayes was fifteen. The hardest part wasn’t moving away from his few friends; it was his newspaper route. He earned £20 (roughly $40) a week, and it was easy money—his route consisted of a single luxury apartment building. He barely had to venture outside.

At his new school, Hayes remained an academic star. “Tom is a talented mathematician,” his annual assessment said. Newspaper delivery no longer an option, he sought out other means of pulling in some cash. At lunchtime, his classmates were always desperate for a little extra money to buy more food, generally a supplemental portion of dessert. It was a ripe opportunity for someone to make a nice profit, Hayes realised, so he skipped eating and instead loaned out his lunch money to classmates. He charged usurious 50 per cent daily interest rates—in other words, someone who borrowed £5 would owe £7.50 the next day. Hayes reckoned he had to charge so much because his borrowers tended to default at an alarming rate. The venture was profitable, keeping Hayes flush with pocket money.

Other moneymaking opportunities beckoned. British sixth form students tend to hang out in pubs. Once, sitting in a Winchester watering hole, his friend David Brown noticed Hayes staring at a row of slot machines. Brown thought Hayes was just zoned out. He wasn’t. The slot machines had signs on them advertising how often they paid out—for example, that an average of one in ten wagers would be a winner. Hayes was watching people robotically feed coins into the machines and calculating which machine was due to deliver the next jackpot. Then he would put his money in. The tactic worked.

Hayes didn’t plan to build a life around maths. Though his interest in finance remained, he realised that his argumentative streak could be enjoyably put to use and decided that he wanted to be a lawyer. In college, preferably at Oxford University, he hoped to major in history and then pursue postgraduate legal studies. But his interview with an Oxford admissions officer went poorly. Given his outstanding academic performance, the point of the interview was more social than scholarly. But Hayes had developed a deep aversion to eye contact, finding it easier to concentrate if he fixed his gaze on an inanimate object rather than a human face. The resulting conversation was laboured. The admissions officer tried to let Hayes down gently, telling him he just wouldn’t enjoy himself at Oxford—British code for him not seeming like the right stock. Hayes was stunned. It was the first time he’d failed for what he assumed were academic reasons.

So it was that an eighteen-year-old Hayes ended up at the University of Nottingham. Nottingham wasn’t especially strong in history, but it boasted excellent maths and engineering departments. Falling back on his acknowledged strengths, Hayes abandoned the social sciences to become an expert in partial differential equations, advanced calculus, and fluid mechanics.

Freed from his mother’s disciplined home—Hayes had a strict 9:30 P.M. bedtime until he left for Nottingham—he went a bit wild, vigorously transitioning from water to much harder stuff. At 3 A.M. one night, Hayes was belting out QPR football anthems in his dorm. A professor was awoken and nearly had him kicked out. Still, by the rambunctious standards of most college kids, Hayes seemed normal, more or less. And, for perhaps the first time in his life, he was happy.


By then, Sandy’s career, attached to that of Gordon Brown, was soaring. Brown had become Chancellor of the Exchequer, the British equivalent of the U.S. Treasury secretary and the second-most-powerful post, behind the prime minister, in Tony Blair’s Labour government. (It wasn’t Hayes’s only connection to the British establishment. Sandy’s sister was married to a Bank of England official named Chris Salmon, whose career also would soon take off.) After Hayes’s first year in college, Brown told Sandy that her son could have a summer job working in the Treasury. She turned down the offer on Hayes’s behalf, without asking him. Sandy felt her son was too conservative to fit into Blair and Brown’s centre-left government. She described Hayes to acquaintances as a Thatcherite, a reference to the 1980s Conservative prime minister Margaret Thatcher. Coming from Sandy, the label was derogatory.

It’s hard to imagine how Hayes’s life might have ended up differently if he had got that summer job. Working in finance in a powerful government department, under the watchful eye of his mother and a supportive boss, might have opened up a world of different possibilities for someone with prodigy-like maths skills. Hayes didn’t even learn of the job offer until years later.

Instead, he spent that summer and the next working behind the bar at the Winchester tennis and squash club near where Sandy and Tim lived.fn1 He worked eighty hours a week, earning about £3.75 an hour, for a weekly haul of £300, not bad for a summer job. But he chafed as patrons condescended and belittled him, regarding Hayes as lower-class even though his family was a member of the club. Come the end of the summer, he could hardly wait to return to school.

One day in the autumn of 1999, Hayes was in the computer lab at the University of Nottingham when he overheard two older students talking about internships they planned to apply for in the London offices of the Swiss bank UBS. The internships paid about £500 a week, though what they actually entailed was a bit unclear to Hayes; they involved something about “operations.” That sounded sufficiently vague that Hayes figured he probably could do it—whatever it was. He didn’t know much about investment banking, aside from vague notions he’d picked up from his grandfather’s stories, but the money sounded great.

That December, he showed up for an interview at UBS’s London offices. He was running a high fever, felt awful, and didn’t think he performed well. He figured he was heading for a repeat of the Oxford rejection, but a few days later, UBS offered him a summer job. The pay was even better than Hayes had expected: £600 a week, or on track to be £27,000 a year. That was more than most adults in Britain earned at the time—and double what he’d earned the prior summer for what he guessed would be less strenuous, more rewarding work. Back to London he would go.


The internship ran from July to September. Hayes rented a place in London and commuted into UBS’s offices, right around the corner from the old Mullens building where his top-hatted grandfather once worked. (In fact, S. G. Warburg, which had been purchased by UBS, had itself purchased Mullens in the 1980s.) Hayes found the job boring. He worked behind the scenes, helping UBS manage its technology and computerised trading systems. At the end of the summer, the bank offered him a permanent job. It wasn’t even conditioned on Hayes graduating—that’s how much they wanted him. But in his few months at UBS, Hayes had learned about the investment banking pecking order. Back-office roles, such as the one he’d been offered, were close to the bottom. At or near the top were traders.

For most people, the notion of a trader is based largely on movies depicting Wall Street’s wild ethos. Bellicose traders, their sleeves rolled up, shout profanities into multiple phone lines simultaneously, while gawking at a half-dozen computer screens and, in their spare time, abusing subordinates, harassing the few women in their midst, and casually cheating anyone they can. The caricature isn’t too far from the truth, but it doesn’t explain what a trader actually does.

In fact, there were different types of traders, Hayes learned that summer. One common variety was called a market maker. A market maker’s defining trait was that he fielded queries from other banks, asset managers, hedge funds, insurance companies, and other institutions that wanted to buy or sell financial products in the market maker’s area of specialisation, say Mexican government bonds. If a trader at a hedge fund called up and said he wanted to sell $10 million of those bonds, the market maker’s job (as an expert in Mexican bonds) was to quickly assess the characteristics of the proposed transaction and then offer the hedge fund a price at which he would be willing to execute the transaction. To be good at the job, the market maker needed a hearty appetite for risk, because if he agreed to do the deal, he then became the proud owner of those Mexican bonds. Sometimes that would be only for a period of a few minutes, before he sold them to another trader at a different institution, but other times it could be much longer. When someone else came along looking to buy Mexican bonds, the market maker would try to eke out a profit by selling the bonds for at least slightly more than he had paid for them.

As long as he was holding on to the securities, the market maker also needed to make sure that the bonds weren’t vulnerable to big swings in value. One way to accomplish that was to buy instruments whose values were likely to move in the opposite direction of the original Mexican bonds—such as a type of insurance contract that gained in value as the risk of the Mexican bonds defaulting rose. That tactic of protecting himself through offsetting positions was known as “hedging.” It was similar to a die-hard Red Sox fan placing a bet that the Yankees would beat his team in the playoffs—that way, even if the fan’s heart was broken, he would at least win a little money as a consolation prize.

Pulling off profitable transactions on behalf of clients wasn’t the only way that traders made money. They also were expected to place their own separate bets on the direction of markets and to amass positions so that they profited if their bets turned out to be correct. This was fundamentally different from market making, but market makers were among those plying this type of trade in addition to their main jobs. By the time Hayes arrived on the scene, this had become standard operating procedure, but it represented a seismic shift in the traditional role played by a bank. No longer was the bank serving mainly as an intermediary whose trading was designed to lubricate the financial system or assist clients in managing their finances; this type of trading was an end in itself, designed to benefit nobody other than the bank and its employees.

There were many reasons for this transformation. One was that regulators in the United States, Britain, and elsewhere, lulled by the lack of a recent financial crisis and swayed by the industry’s enormous political clout, had taken a hands-off approach to overseeing this sort of speculative activity. In the United States, a law imposed in the wake of the Great Depression that prohibited commercial banks from partaking in investment banking activity was repealed, paving the way for the creation of megabanks like Citigroup whose trillion-dollar balance sheets allowed the placement of massive wagers with the banks’ (or, more precisely, its investors’ and customers’) own money. Another factor was that, over the past couple of decades, many old Wall Street partnerships—firms like Goldman Sachs, Bear Stearns, Lehman Brothers, and Morgan Stanley, which had been owned by a small group of their uppermost, longest-serving employees—had converted into publicly traded companies. That allowed the firms’ partners to cash in on their ownership stakes, catapulting some of them to near-billionaire status. But it also meant that the companies became accountable to a new class of owners, many of whom demanded to see profits grow quarter after quarter, year after year. Unleashing their traders to roll the dice more aggressively was one way for the Wall Street banks to achieve that—assuming, of course, that their bets paid off.

Whatever the causes of the shift, it didn’t take long for traders—often paid a portion of the profits they generated—to rise to the top of the banking totem pole, to churn out ever-greater profits (and the occasional catastrophic loss) for their institutions,fn2 and, with a little help from Hollywood, to capture the public’s imagination. And the interests of a trader whose performance was measured based on how much he helped clients versus one who was rewarded based on how much money he raked in through his own trading—well, they were very different. So were the interests of a bank that mainly focused on its clients’ needs and one that profited in large part from trading that was divorced from—and sometimes diametrically opposed to—what its customers wanted.

The art of making money through this so-called proprietary trading was partly in the timing: Bet on something that’s cheaply priced, protect yourself with an offsetting position, get rid of the original asset just as it reaches its peak value, extricate yourself from the offsetting hedge position, and pocket the proceeds. In the ideal scenario, savvy traders managed to construct enough overlapping hedges that they virtually eliminated any downside risk and guaranteed themselves a small profit, regardless of which way markets moved. Traders with advanced maths skills, able to swiftly calculate and recalculate the ever-changing odds of a wide range of bets and to craft computer programs to identify opportunities for profits, enjoyed an enormous advantage. And you didn’t need to win consistently: Billionaire Ken Griffin once said that he expected the stock market bets of his employees at hedge fund Citadel to pay off just 52 per cent of the time. The great news for the trader was that, if his positions gained in value, he would share in the spoils. And if his bets didn’t pan out, the worst-case scenario was that he lost his job. That rarely happened and, when it did, it tended to be pretty easy to find a new gig, without having to explain much about the reasons for his sudden departure from the prior job. As a result, traders were basically in a no-lose situation.

Hayes cannily accepted the UBS operations gig, but when he returned to Nottingham in the autumn, he started applying for trading jobs at other banks: the Royal Bank of Scotland, J.P. Morgan, Goldman Sachs, and Deutsche Bank. He landed interviews everywhere other than at Goldman. When the Scottish bank offered him an entry-level position as part of the bank’s training program, he accepted and informed UBS that he no longer wanted the back-office assignment.

Hayes told his mother about his newfound career ambitions. She was opposed in principle to the idea of her son working for an investment bank and spent hours trying to talk him out of it. Hayes’s father wasn’t thrilled, either. Hayes shrugged off their concerns.

He was hardly alone in being tempted by the potential riches of a career in finance. All over the Western world, promising students, especially those with maths and engineering backgrounds, were flocking to banks, seduced by the chance to put their technical skills to use in creative ways, while hauling in fat pay cheques. The shift accelerated amid the moribund U.S. economy of the early 1990s, when aspiring engineers realised that jobs in their hoped-for fields, such as aerospace, weren’t nearly as plentiful or remunerative as they had expected. At Caltech, one of the country’s premier engineering schools, banks were showing up in droves at campus job fairs. “The bottom line is, it pays really well,” a Caltech engineering major, headed for a bond-trading job at investment bank Salomon Brothers, explained to the Los Angeles Times in 1993. It didn’t matter that much of what the industry was doing served little purpose beyond enriching itself. Larry Summers, the Treasury secretary in the Clinton administration, noted that starting in the 1970s, the finance industry was “transformed from a field that was dominated by people who were good at meeting clients at the nineteenth hole to people who were good at solving very difficult mathematical problems that were involved in pricing derivative securities.”

One of Hayes’s classmates at the University of Nottingham was a young man named Kweku Adoboli. The Ghana-born son of a United Nations peacekeeping official, Adoboli grew up in the Middle East and then England. At Nottingham, he majored in computer science. Afterwards, he got a summer internship at UBS and then was offered a full-time operations job. Unfortunately for both men, their lives would continue to follow parallel trajectories.

bar graph

After graduating from Nottingham in July 2001 with honours in maths and engineering, Hayes flew to the United States. It was his second trip there, following a 1998 visit to South Carolina to visit his father’s relatives. This time, he had stops in Miami and New York City before heading to Washington, D.C. His uncle, Chris Salmon, had been sent on a temporary assignment by the Bank of England to work at the International Monetary Fund, just down Pennsylvania Avenue from the White House. Hayes wasn’t terribly close to Salmon, but they had shared interests in economics and finance, and Hayes spent the brief visit talking with him about how he envisioned building a career as a bank trader.

Hayes started at the Royal Bank of Scotland that autumn. RBS’s office was on the bustling eastern edge of the City, just across a busy street from the Bishopsgate Police Station. Hayes’s starting salary was about £35,000, along with an expected £15,000 bonus—a substantial take for someone just out of university.

Hayes was in a training program that sent its aspiring millionaires cycling through various trading desks to get a taste of the different flavours of the bank’s businesses. Hayes spent most of his time doing menial tasks. There was a lot of data entry. He learned to use Microsoft Excel, whose spreadsheets served as the backbone for many of RBS’s trading models. He also scurried around doing personal favours for established traders—he got their keys cut, fetched their coffee, delivered their clothes to the dry cleaner, purchased gifts for their parents and girlfriends. Hayes, like plenty of grunts on trading desks, endured merciless mockery. One subject of harassment was his clothes—he still dressed too well. He wore a jacket and tie to work while most colleagues opted for a business-casual look of slacks and a light-coloured button-down shirt. One trader threatened to cut off his necktie if he wore it again.

There were no classes where wannabe traders were taught the ropes. They were supposed to learn through osmosis, by watching veterans do their jobs. And the lessons Hayes picked up were similar to those absorbed by a generation of traders across Wall Street and the City of London: Make money at all costs. Traders’ performances were evaluated based on two factors: their ability to manage risks and their ability to maximise revenue. There were really no other criteria. Traders were encouraged to go the extra mile to wring out extra profits, trained like bloodhounds to sniff out that edge. It could be in the form of unique information, or unique relationships with huge clients, or unique access to naïve and gullible customers, or a unique way to massage indexes or benchmarks to make trades more profitable. Whatever the edge was, you had to find one. The way you dressed, the way you behaved—those might make you a target for teasing, but they were irrelevant when it came to how much you got paid. And that was the ultimate yardstick of success. When it came to obeying the rules, the only check was the bank’s legal and compliance department, which was supposed to make sure employees knew the rules—statutory, not moral—that they had to follow. That department—a sort of internal affairs bureau—wasn’t exactly a force to be reckoned with. During compliance training sessions at RBS, traders hunched over their BlackBerrys playing the addictive “Brick Breaker” game. The goal was to knock out each layer of tiles, brick by brick, the high score the only measure that mattered.



Mohammad Reza Pahlavi needed cash. In fact, he needed $80 million of it.

Two years earlier, in October 1967, dressed in full military regalia and wielding a sceptre, Pahlavi had anointed himself Iran’s Shahanshah, or King of Kings; he would henceforth be known as the Shah for short. His coronation ceremony was held at Tehran’s mosaic-and-mirror-covered Golestan Palace. The Shah marked the occasion, which also happened to be his forty-eighth birthday, by donning a large, jewel-encrusted crown over his greying hair. He also placed a sparkling platinum crown on the bowed head of his third wife, Empress Farah. His golden throne glittered with 26,733 jewels. “I feel closer than ever before to my noble and patriotic people,” he declared to his subjects.

The Shah had inherited the title from his father, Riza. Riza Shah the Great, as he liked to be called, was a military general who deposed the previous ruling dynasty and changed the country’s name to Iran from Persia. After taking over from his father, Shah Pahlavi briefly lost power when a democratically elected government, Iran’s first, came to power in the early 1950s. That government, led by socialist prime minister Mohammad Mossaddegh, nationalised Iran’s vast petroleum industry. Believing his politics smacked of communism, in 1953 the CIA orchestrated a coup and reestablished the Shah’s supremacy. If that wasn’t enough to leave the Shah in the West’s debt, the massive amount of American military and economic aid pouring into his country surely did the trick.

Now the Shah was looking for an $80 million loan to finance a new government agency. To facilitate the deal, one of the Shah’s emissaries got in touch with a tall, mouse-faced man named Minos Zombanakis. Born in 1926 in a poor town on the Greek island of Crete, Zombanakis endured the German occupation of his country during World War II and then, without a college diploma, worked his way up through the Greek banking system, including a stint at the central bank. As a twenty-nine-year-old, he showed up in Cambridge, Massachusetts, and talked his way into a Harvard University graduate program, where one of his classmates was Henry Kissinger. Afterwards, he returned to banking, working in Rome and the Middle East, fostering connections in Iran, before settling in London with his wife and son. By the 1960s, he had emerged as a pillar of the city’s banking industry, someone with a reputation for innovating and taking risks. In 1969, when the Shah was seeking the loan, Zombanakis had just opened the London outpost of Manufacturers Hanover, a large New York bank that would later become part of the J.P. Morgan Chase empire.

The $80 million that the Shah wanted was too much for one bank to just fork out, even if the would-be borrower happened to be a government leader backed by a superpower. So Zombanakis lined up a couple of dozen Western and Middle Eastern lenders to make the loan as a group.

Now the question became what interest rate to charge the Shah. This was the type of problem that was increasingly vexing London’s banking industry. The City, whose labyrinth of narrow, windy streets largely dated back to Roman times nearly two millennia ago, had always played a leading role in global finance, thanks to London’s status as an imperial capital. But globalisation was accelerating the transcontinental flow of cash and cementing London’s role as a global financial crossroads. As business boomed, bankers like Zombanakis came up with creative ways to meet customers’ diverse financial needs and, in the process, to make a lot of money for themselves. One invention was the use of a group of banks, known as a syndicate, to jointly make loans. That had the advantage not only of reducing the amount that any individual bank had to kick in, but also of sidestepping rules that capped the amount of risk that banks were allowed to take with individual clients.

Normally, a big loan would carry a fixed interest rate, one that didn’t change at all over the life of the loan. That had the benefit of simplicity, but it left the banks vulnerable to changes in prevailing market interest rates in the years before the loan was repaid. If, for example, a central bank had set its base interest rates at 3 per cent, the banks might charge their customer a fixed 5 per cent interest rate for the duration of the loan. That would be enough for the banks to pocket a tidy sum. Even if the central bank then hiked interest rates to 4 per cent, the banks would still manage at least a small profit. But if rates rose further still, their profits would be wiped out. If the loan was small, the loss was small, too. But when the amount was massive—and that’s what the Shah was looking for—well, that was different.

One way to address the risk would be to have the interest rate that the banks charged fluctuate in tandem with base interest rates. That seemed easy enough; after all, central banks generally adjusted their rates only on occasion. But in London’s increasingly busy financial markets, that still left the banks exposed to changing market conditions. Most banks financed themselves by borrowing money from a variety of sources, including short-term loans from rival banks, part of the financial merry-go-round that kept the banking world spinning. These interest rates that the banks charged each other fluctuated much more frequently. The changes tended to be small, but even minuscule moves could have big impacts when applied to multimillion-dollar loans.