David Enrich on one of the biggest banking scandals ever

David Enrich, the author of The Spider Network, talks about his account of one of the biggest banking scandals ever

The Spider Network’s cover claims the book is about 'one of the greatest scams in financial history.' Tell us more.

That’s a reference to banks and their employees manipulating an interest rate known as Libor. Libor is an acronym that stands for “London interbank offered rate,” but that’s not important. What’s important is that Libor is the number that determines how much people and institutions pay in interest on just about any type of loan – mortgages, credit cards, student loans, giant corporate loans, and so on. Banks tried to skew Libor for a number of reasons, including to make some of their investments more profitable.

There have been many banking scandals recently. Why should we care about this one?

Two reasons. First, because it has the potential to affect how much everyone – you, your town, your employer – pays in interest on their debts. Those are big numbers, and small changes in interest rates can mean millions of dollars down the drain. Second, Libor is such an important part of the modern financial system that banks’ efforts to manipulate it (and government officials’ inability or unwillingness to stop it) tell us a ton about the ethics and integrity of the entire financial system. Spoiler alert: Just about nobody comes out of this looking good.

Who are the people that were trying to manipulate Libor? Do they resemble Hollywood bankster villains?

Yes and no. At the center of this scandal is a mildly autistic mathematician named Tom Hayes. He went from being one of the most sought-after traders in the entire banking industry to being one its most-wanted bad guys. But Hayes was no “Wolf of Wall Street” wild man; he was much happier with a glass of orange juice, a bucket of KFC and a warm bath than he was dining at a Michelin-starred restaurant or partying at a swanky club. Some of his compatriots, though, are out-of-control hotshot bankers right out of central casting. That’s one of the fun parts about The Spider Network – the characters range from socially awkward nerds to coke-snorting party animals. And the more you get to know them, the less they adhere to their stereotypes.

So are lots of these people are now in prison?

No, only one is. This is a good illustration of why so many people remain furious with the banking industry and the regulators and prosecutors who were supposed to police it. Even after a once-in-a-century financial crisis, which inflicted huge damage on the economy and millions of families, very few bankers were held personally accountable for the industry’s sins. In the Libor scandal, prosecutors went after a number of midlevel traders and brokers, passing over quite a few higher-ranking executives who knew about, condoned or participated in what turned out to be illegal activity.

...the characters range from socially awkward nerds to coke-snorting party animals. And the more you get to know them, the less they adhere to their stereotypes...

The Spider Network is filled with inside-the-room conversations and anecdotes. How do you know all of this stuff?

In researching and writing this book, I relied on three main types of sources. First, I interviewed dozens of the people involved in the scandal and the authorities who eventually pursued them. Second, I was given exclusive access to an entire hard drive’s worth of evidence that regulators had collected in their investigations of Libor manipulation: internal bank emails, chat sessions, phone recordings, trading records, instant messages, and so on. There were tens of thousands of these, and a lot of them provided contemporaneous accounts of what traders and brokers were thinking, feeling and doing in their personal as well as professional lives. Third, and most important, I developed a years-long relationship with Tom Hayes, the scandal’s alleged ringleader. Eventually I got to know his wife and other family members, too. And they opened up to me in an extraordinarily candid, comprehensive fashion.

You got to know the scandal’s ringleader? How did that happen?

Back in 2013, I wrote a series of stories about Hayes and his ilk for the Wall Street Journal. One of Hayes’s former classmates put me in touch with him, and over many months I gradually convinced him to open up. By the climax of this story, in 2015, I was talking, emailing, exchanging text messages or drinking with Hayes and his wife multiple times a day. I got to know both of them better than I knew some of my own friends.

Do you still keep in touch with him and his family?

Yes, I do. I wrote this book while living in London, but moved to New York in 2016. The Hayes family still lives in England. I keep in touch with them regularly. As for how they’re doing, the answer is: not very well. You’ll have to read the book to find out why.

Will we be able to understand The Spider Network even if we don’t know anything about finance?

I hope so! I’ve tried to write it in a way that is accessible to just about anyone who likes a good tale. Don’t be intimidated by the subject matter: The banking industry does a really good job of making itself seem more complicated than it really is. (It’s a convenient way to keep peddling mediocre products to clients and to justify sky-high profits and bonuses.) The reality is that much of finance, when boiled down to its essence, is pretty intuitive, and one of my goals with this book is to demystify things for laypeople.

More about the author

The Spider Network

David Enrich

Listed as an FT book of the month

‘Anyone with an interest in financial services and in what has gone wrong will find The Spider Network compelling.’ - Daniel Finkelstein, The Times

‘Will snare you in its web of deceit, lies, corruption, manipulation and colourful characters. [a] brilliant investigative exposé’ - Harlan Coben, bestselling thriller author

‘A gripping narrative ... impressive reporting and writing chops are on full display ... reads like a fast-paced John le Carré thriller, and never lets up’ - New York Times book review

‘A feat of reporting, and much of it reads like a novel’ - Leigh Gallagher, Washington Post

‘A model of investigative financial writing... a more satisfying read than THE BIG SHORT by Michael Lewis’ - Literary Review

‘Remarkable’, Sunday Times

‘Jaw-dropping’, Financial Times

In 2006, an oddball group of bankers, traders and brokers from some of the largest financial institutions made a startling realization: Libor—the London interbank offered rate, which determines the interest rates on trillions in loans worldwide—was set daily by a small group of easily manipulated administrators, and that they could reap huge profits by nudging it fractions of a percent to suit their trading portfolios. Tom Hayes, a brilliant but troubled mathematician, became the lynchpin of a wild alliance that included a prickly French trader nicknamed “Gollum”; the broker “Abbo,” who liked to publicly strip naked when drinking; a nervous Kazakh chicken farmer known as “Derka Derka”; a broker known as “Village” (short for “Village Idiot”) who racked up huge expense account bills; an executive called “Clumpy” because of his patchwork hair loss; and a broker uncreatively nicknamed “Big Nose” who had once been a semi-professional boxer. This group generated incredible riches —until it all unraveled in spectacularly vicious, backstabbing fashion.

With exclusive access to key characters and evidence, The Spider Network is not only a rollicking account of the scam, but also a provocative examination of a financial system that was crooked throughout.

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