As No One Watched, Trump Pardoned 5 Megabanks For Corruption Charges—Who He Owes Millions

Trump followed in the footsteps of Obama and pardoned five megabanks—one of which he reportedly owes up to $300 million in outstanding loans.

Gold, FX Lawsuits May Have Less than 50% Chance of Winning- Vince Lanci

Writing from the road... 

Author Vince Lanci on marketslant.com

We have written many times about manipulation in this column. We seek justice and fairness in the markets that we continue to consider "free". First some thoughts on the trail of trader-speak I"ve been pouring over recently.

The takeaway is this: getting over the circumstantial evidentiary bar to be permitted to get to discovery was a big deal. Rosa Abrantes has done much to get these cases as far as she has. But now, forensic work at the operational level is needed. And it just is not easy to prove the cases. Now, even with chats and trade logs, the facts can almost never be known.

Within the constraints of our legal system, it is much harder to prove manipulation then the plaintiffs would have you think. This refers to the precious metals cases, the current FX cases, and the pending treasury cases.

We are now at the discovery level, thousands of documents with chats and messages back-and-forth between traders are available for the plaintiffs to review. This is great. But can the lawyers understand intent from written words?

He was just kidding! Can you prove otherwise?

PROVING INTENT IS NOT EASY

This is because the facts needed to prove "intent" are in the traders heads. And without intent you cannot win.

In the three legged stool that is the legal system, intent is hardest leg to establish. I think "means, and opportunity" are the other 2.

Trader conversations are not prose, to say the least. It is near impossible without inflection and confirmation in chats to determine, or differentiate sarcasm from sincerity. How can one divine intent from a chat where a trader alternately asserts he"s infallibly correct in an opinion, and then laughs at himself for having such an outrageous opinion? No, the burden of proof that the plaintiffs must satisfy is very difficult in this circumstance. 

Note my own spelling in these very articles that the Soren K group posts. My own trading messages were difficult to translate let alone divine my intent. Frequently brokers would object to my horrible typing. I would respond with

"My misspelling is protection against your execution error. If you mess up I can always blame you for not clarifying." I would then follow that with a LOL.

Was I joking? How can you tell? Frankly, I was truly sloppy and not detail oroented. But it also served to me as a hedge against what sometimes was poor service. I insisted on clarification. This was one way I got it.

PERSONAL EXPERIENCE SAYS TRUTH WITHOUT FACTS LOSES

In one instance I was subject to an eight hour deposition regarding a manipulation case in natural gas options. It Involved a major bank in Canada, a major energy exchange, a multibillion-dollar hedge fund, a new electronic trading platform, and traders who executed on that platform of which I was one.

I was a material witness and wasn"t a party to either side of the prosecution. But I ended up essentially being an expert witness because of the questions asked by one excellent attorney.

It was clear that they were not able to divine intent at the trading and forensic level of other participants in that scandal. They sought evidence of manipulation between the hedge fund and a bank employee. There was none to be found in the trades, or chats as damning as they may have been in appearance.

It was that day that I learned in the legal world, conditional probability and narrative do not hold up when there are no facts to back it up. TRADERS USE CONDITIONAL PROBABILITIES TO MAKE DECISIONS IN UNCERTAINTY. JUDGES RISK NOTHING. IT ALL COMES DOWN TO FACTS. WITHOUT FACTS, A CASE GETS SETTLED ON THE COURT STEPS. And the facts proving intent were in the peoples" heads. Short of a download of their brains the cases cannot be won easily.

It was made obvious to me later by my own attorney that the focus should"ve been on something entirely different then the line of questioning being asked.

His advice was meant to let me know that if something was going on it would"ve been impossible for them to divine it from trying to figure out what traders are doing and why they"re doing it.

The plaintiffs actually settled days later in part most likely because of the information given during my testimony. Ironically months before my deposition, one of the law firms" "expert consultants tried to hire me for their case. They actually called me seeking me as an expert witness.

My response was "I am qualified to do this, but if you check your list I"m a material witness in the case as I participated in the trades." Based on their discovery interview on me, I now know that case would have ended differently had they been able  to translate, correlate and corroborate trades to chats.

HFT IS EASIER TO PROVE

It is actually easier to prove intent in HFT cases. And that is because the programming used is essentially a trader"s intent in code. Programmers write down exactly what the trader wants to do!

But that won"t happen as long as it is run by bigger players. Mike Coscia was an impediment to other bigger form HFT rigging. Ask NANEX"s Eric Hunsader. Once you get a hold of a firm"s programmer, intent is easily proven. This is why you will increasinglyhear " The programmer is privy to proprietary secrets and cannot be deposed. Secrets as in INTENT TO SPOOF"?

CHATS DO NOT PROVE INTENT

Reviewing some of the Gold and FX conversations, even in context of the actions, is not such an easy proof of manipulation as the prosecutors would have you believe. It seems to me that the plaintiffs have a less than 50/50 chance of conviction and will settle on the court steps if they scare the defendants sufficiently.

Deutsche bank in our opinion was a fluke. A fluke because they had much bigger fish to fry with the DOJ. Why else would a bank walk away from its London precious metals vault only two years after opening?

LOST IN TRANSLATION

The Gold, Silver, Fx and now the Treasury manipulation cases are not easily proven using facts. And our legal system just does not burn witches without proof anymore. Having been a material and expert witness in these type things, the accusers are not usually prepared for the arcane speech traders use.

Just as when a lawyer says "res ipse loquitor", a trader can say, "it"s going down, I guarantee it! Lol." And no one an KNOW what he really intended. How can the plaintiff prove that the LOL is him not mocking himself?

Often times it is self recognition of his own failure, hubris, and ego. This, as opposed to him laughing at some unsuspecting victim. So, given this, how can the plaintiffs pretend to know what goes on in the traders mind? There is lexicon, trader sarcasm, wishful thinking as opposed to willful manipulation, and the old adage that "no one is bigger than the market."

FACTOIDS ARE NOT FACTS

Point here is that to win, all the defense has to do is make it clear that no one can know what the words written were intended to convey. In a legal system that needs facts, and where those facts are in the heads of the chat writers, it is not a slam dunk to get the evidence recognized as fact and not interpretation of what we feel a person may or may not have intended.

Lacking expert forensic preparation that links and correlates the chats with time stamped subsequent actions, all the plaintiffs will likely get is conjecture and muddied waters.  Facts will not be proven we bet. Not without narrative and contradictions found in discovery process. A ton of circumstantial material will not substitute for a real fact.

And unless litigators can prove contradiction of deposed traders on the stand between what they wrote, their actions, and what they say in discovery, the case is not easily won. Read what Matt Levine has to say on the topic below. 

Vince Lanci.

Vlanci@echobay.com

Twitter @vlancipictures

Marketslant Articles

 

Trader chats.

by Matt Levine.

My basic theory of post-crisis financial scandals is that the main illegal thing that traders do is send each other dumb emails and chat messages. So many of these scandals are hard to describe in objective terms.

The Libor scandal was about submitting fake numbers in Libor surveys, but even non-scandalous Libor submissions were pretty fake, so the only way to distinguish the bad fakes from the good ones was by finding chat messages saying things like "LOWER MATE LOWER !!" What was scandalous in the foreign-exchange-fixing scandal was that banks traded ahead of customer orders, but that was also legal; what was illegal was the dumb chats between those banks sharing customer information. The chats and emails are evidence of substantive illegality -- illegal collusion, manipulation, etc. -- but also display an attitude.

If they were written in dull legalese, they would have created much less of a reaction; regulators might not even have noticed the problem. But they weren"t; they were filled with obscenity, slang, misspelling, and promises of Champagne, all of which tend to enrage prosecutors and juries and the public.

Anyway I enjoyed this story about the irreducible atomic unit of dumb trader chat: A five-word message to a rival banker was enough to cost former Citigroup Inc. trader David Madaras his job as the bank fought to appease regulators probing the foreign-exchange scandal engulfing the industry.

Citigroup’s Timothy Gately disclosed the message on the first day of Madaras’s employment lawsuit in London Tuesday. The executive said the April 2011 chat constituted gross misconduct and firing Madaras was the only appropriate sanction. "he’s a seller/fking a," Madaras told a rival trader who had just disclosed the identity of a client, Gately said in a filing prepared ahead of the hearing.

That chatroom message "validated an external trader’s disclosure of a client name," Gately said in the filing. The first three words -- "he"s a seller" -- are substantive misconduct, disclosing a client"s order to a competitor, and enough to get you fired in an atmosphere of heavy scrutiny of that sort of thing.

The next two -- "fking a" -- are substantively superfluous, but you can"t have a scandalous trader chat without obscenity and misspelling. You can"t imagine a trader actually being fired for typing "he"s a seller," but of course one was fired for typing "he"s a seller/fking a." This is partly a matter of psychological makeup -- how could the traders resist cursing? -- but it might also be a matter of technology. What search, what flags, brought that chat to the executives" attention? Does compliance monitor every time traders type "he"s a seller"? (Presumably they type that a lot!) Or is there a search for "fking," and other variant spellings, that triggers review?

Read more by Soren K.Group

Secret Recording Implicates Bank of England In Libor Rigging

While it may seem like yesterday, it was nearly five years ago that the Libor scandal first broke, and with it brought scandalous suggestions that none other than the Bank of England was implicated.

As we first reported in July 2012, according to Barclays then CEO Bob Diamond, it was high level individuals at the BOE who may (or may not) have been aware that Libor had been "manipulated" and were (or were not) also active in the setting process:

• BARCLAYS SAYS BANK OF ENGLAND CALLED ON OCT. 29, 2008 ON LIBOR


• BARCLAYS SAYS DIAMOND MADE NOTE OF CALL; RECEIVED CALL FROM PAUL TUCKER


• BARCLAYS SAYS TUCKER SAID `CERTAIN" BARCLAYS DIDN"T NEED ADVICE; SAID LIBOR DIDN"T ALWAYS NEED TO BE SO HIGH

And yet, concerned about how deep the rabbit hole would go if a central banker was implicated, Diamond tried to cover it up:

• BARCLAYS SAYS DIAMOND DIDN"T BELIEVE HE HAD GOT INSTRUCTION

Even as:

• BARCLAYS SAYS DEL MISSIER CONCLUDED INSTRUCTION HAD BEEN GIVEN; TOLD RATE SETTERS TO LOWER RATES

The note in question was represented below:

Needless to say, when it comes to the central bank nothing happened: a few BOE personnel were reassigned, some quietly lost their jobs, and nobody was prosecuted or charged. Certainly, nobody went to prison.

* * *

Fast forward nearly five years later, when the Libor scandal may have reemerged after a secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama.

According to the BBC, the 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down, just as suggested by Bob Diamond in 2012.

The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England. In the recording, a senior Barclays manager, Mark Dearlove, instructs Libor submitter Peter Johnson, to lower his Libor rates.

Dearlove tells him: "The bottom line is you"re going to absolutely hate this... but we"ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower." To which Johnson objects, saying that this would mean breaking the rules for setting Libor, which required him to put in rates based only on the cost of borrowing cash.

Mr Johnson says: "So I"ll push them below a realistic level of where I think I can get money?"

His boss Mr Dearlove replies: "The fact of the matter is we"ve got the Bank of England, all sorts of people involved in the whole thing... I am as reluctant as you are... these guys have just turned around and said just do it."

The phone call between Mr Dearlove and Mr Johnson took place on 29 October 2008 the BBC notes, the same day that Tucker, who was at that time an executive director of the Bank of England, phoned Barclays boss Diamond. Barclays" Libor rate was discussed.

Diamond and Tucker were called to give evidence before the Treasury select committee in 2012. Both said that they had only recently become aware of lowballing, despite Diamond"s abovementioned tacit admission, which he then tried to cover up.

In its report, Panorama says it played the October 2008 recording to Chris Philp MP, who sits on the Treasury committee.

He told the programme: "It sounds to me like those people giving evidence, particularly Bob Diamond and Paul Tucker were misleading parliament, that is a contempt of parliament, it"s a very serious matter and I think we need to urgently summon those individuals back before parliament to explain why it is they appear to have misled MPs. It"s extremely serious."

Responding to the recording, Diamond told the BBC: "I never misled parliament and… I stand by everything I have said previously." Tucker did not respond to our questions. Peter Johnson, the Barclays Libor submitter, was jailed last summer after pleading guilty to accepting trader requests to manipulate Libor.

Two traders who made requests for Mr Johnson to move Libor up or down, Jay Merchant and Alex Pabon, were found guilty last June of conspiracy to defraud along with another submitter, Jonathan Mathew.

However, the jury could not reach a verdict on two other traders then on trial, Ryan Reich and Stelios Contogoulas. The Serious Fraud Office requested a retrial which concluded last week. Both Mr Reich and Mr Contogoulas were unanimously acquitted. Panorama also played Contogoulas the October 2008 recording. He said he believed that if it had been played during the criminal trials it might have affected the outcomes.

He said: "That"s the thing, you know in these trials that we went through they separated everything, separated trading requests and lowballing. So anything that has to do with this they don"t go in. So you"re asking me do I think that if all this was in would it make a difference? Probably, is the answer."

* * *

Another notable "criminal" to emerge from the Libor scandal was Tom Hayes, the UBS and Citi-based Libor manipulating protagonist of the recent book "The Spider Network", and who was arguably at the center of the prosection"s LIbor case. He has repeatedly claimed that the real culprits are not those - like him - who executed the Libor rigging, but the ones at the very top who have the instructions to do so.

Like, as the case may be, the Bank of England.

Yet while some junior people went to prison, nobody in the corner office, and certainly nobody at the BOE has faced any criminal consequences from their actions.

The BBC adds that the Serious Fraud Office, which brought the Barclays prosecutions told Panorama that evidence of lowballing, was provided to the recording. They also say they are still investigating lowballing and that they follow the evidence "as high as it goes and aim to charge the most senior people wherever there is a realistic prospect of conviction".

The Bank of England said: "Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.... Nonetheless, the Bank of England has been assisting the SFO"s criminal investigations into Libor manipulation by employees at commercial banks and brokers by providing, on a voluntary basis, documents and records requested by the SFO."

Ironically, it is precisely that it was unregulated that may have given the Bank of England the green light to assume it can manipulate it with impunity.

It remains to be seen if, nearly a decade after the Libor manipulation took place, any central banker will go to prison over it.

How The FBI Laid A Trap For A Financial Scandal’s Mastermind

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.

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.

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.

“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.