After promising to clean up the U.K. Serious Fraud Office’s record of failures, the collapse of one of his own cases puts the agency’s director under more pressure than ever to score a victory in its Libor probe.

The trader at the center of the investigation, Tom Hayes, pleaded not guilty this week and will go on trial in 2015 in the first prosecution stemming from the global investigation of rate-rigging. Two of his alleged co-conspirators, former RP Martin Holdings Ltd. brokers Terry Farr and James Gilmour, also entered not guilty pleas and will face trial after Hayes, who worked at UBS AG and Citigroup Inc.

The pleas come one week after the collapse of a high- profile case for the SFO against British businessman Victor Dahdaleh, accused of paying about 40 million pounds ($65 million) in bribes to senior executives of a Bahrain-owned aluminum company. The SFO halted the case five weeks into a two- month trial, saying there was no realistic chance of a conviction.

David Green, the director of the SFO, has spent his first 20 months in the post trying to restore the agency’s credibility after years of fumbled cases and a government attempt to subsume the prosecutor into a national crime body. Now he may face his greatest scrutiny so far.

“The collapse of the Dahdaleh trial comes at the end of a torrid 18 months for the SFO,” said Simon Hart, a lawyer at RPC LLP in London. “Last week’s developments will increase the pressure on the SFO yet further in relation to the ongoing investigations into Libor.”

Extra Funding

Hayes, a former derivatives trader in Tokyo, pleaded not guilty to eight counts of conspiracy to defraud. Green has called the case the “largest and most complex SFO investigation.” The treasury has granted extra funding for the case, which was taken on after Chancellor of the Exchequer George Osborne urged them to do so and about 60 people at the agency are working on the probe, Green has said.

Nilima Fox, a spokeswoman for the SFO, and Gareth Patterson, a trial lawyer for Farr, declined to comment. Lawyers for Hayes and Gilmour didn’t immediately respond to requests for comment.

Since April last year, Green has re-opened a probe into the collapse of the hedge fund Weavering Capital (UK) Ltd. and made several promises, including “significant developments” in both the Libor investigation and one into payments Barclays Plc made to the Qatari sovereign wealth fund in 2008 in return for an investment that avoided a government bailout.

“If the SFO is going to take on these high-profile, high- risk cases, it needs to make sure that its staff and systems are up to the job,” said Emily Thornberry, the spokeswoman for legal issues for the U.K. opposition Labour Party. “The collapse of the Dahdaleh case indicates yet again that this is not always the case.”

‘Differed Markedly’

The Dahdaleh case collapsed after Bruce Hall, the former chief executive officer of Aluminium Bahrain BSC, gave evidence that “differed markedly” from the witness statement given to the agency, the SFO said. Two key witnesses from the U.S. were also unwilling to testify. Hall’s lawyer, Peter Binning, declined to comment.

“There were a number of elements to the way the SFO approached this case that should have triggered alarm bells,” said Neil O’May, a lawyer for Dahdaleh in London at Norton Rose Fulbright LLP. “It would be sensible for the agency to review this so the same problems aren’t repeated in future investigations.”

Green was also forced to close a legacy investigation into the property tycoons Robert and Vincent Tchenguiz last year over botched search warrants. The brothers were arrested in 2011 in relation to the collapse of Iceland’s Kaupthing Bank Hf. The case was dropped and the duo are suing the agency for 300 million pounds, nearly 10 times the agency’s budget for the year.

Improperly Delegated

The SFO came under further scrutiny in August for losing evidence from an investigation into BAE Systems Plc, including 32,000 pages of documents and 81 audio tapes. The information was from a six-year bribery probe into the defense company that ended with a 30 million pound fine. U.S. authorities fined BAE $400 million for similar offenses.

The SFO faced allegations in September that Richard Alderman, its former director, improperly delegated decisions on whether to pursue cases to its CEO at the time, a non-lawyer. A U.K. judge ruled he had acted legally. The former director has also been criticized by lawmakers over payouts given to two departing executives that totaled more than 400,000 pounds.

The agency is trying to improve its relations with U.S. prosecutors at the Justice Department, who began investigating rate-rigging more than a year before the SFO did and were the first to charge Hayes.

Tensions, Reality

“Historically the SFO’s relationship with the DOJ has been its most important external relationship,” said Glyn Powell, a London-based lawyer and the former head of the fraud division at the SFO. “But there have always been tensions within that partnership and perhaps a different, and more flattering, perception within the SFO about relations than is in fact the reality.”

The DOJ has also charged former UBS trader Roger Darin and three former brokers at ICAP Plc. None of the four, who aren’t in the U.S., have been charged in the U.K.

The SFO should be responsible for prosecuting British nationals at British banks, Green said in a speech earlier this year. Their investigators are “moving hard and fast on the case” to catch up with U.S. investigators, he said.

“High-profile failures don’t convince the DOJ to leave white collar prosecutions to the SFO,” said Roger Burlingame, a former U.S. federal prosecutor now based in London.