UBS 'rogue' trader Kweku Adoboli jailed for seven years

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Created on Tuesday, 20 November 2012 00:00

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UBS 'rogue' trader Kweku Adoboli jailed for seven years

Jury convicts Adoboli of two counts of fraud in relation to £1.5bn trading loss at one of world's best-known banks

Peter Walker

A rogue City trader who almost brought down the banking giant UBS by recklessly gambling huge sums in secret, off-the-book deals has been jailed for seven years for committing what police describe as the UK's biggest ever fraud.

Kweku Adoboli, 32, ended up costing UBS more than £1.5bn. At one point the potential liabilities of his illicit trades totalled more than £7bn, a sum described by prosecutors as sufficient to bring down the bank.

A jury at Southwark crown court convicted the Ghanaian-born, British educated former private schoolboy on two counts of fraud, one by a unanimous verdict the other on a majority. He was acquitted on four separate charges of false accounting. The judge, Mr Justice Brian Keith, jailed Adoboli for seven years.

The detective chief inspector who led the investigation, Perry Stokes from City of London police, said after the Adoboli was a sophisticated fraudster.

"To all those around him Kweku Adoboli appeared to be man on the make whose career prospects and future earnings were taking off. He worked hard, looked the part and seemingly had an answer for everything.

"But behind this facade lay a trader who was running completely out of control and exposing UBS to huge financial risks on a daily basis. Rules put in place to protect the bank's position and the integrity of the markets were being bypassed and broken by a young man who wanted it all and was not willing to wait."

Adoboli was arrested on 14 September 2011 after back-office accountants began to press him on apparent anomalies in his trading records. Walking out of UBS's London headquarters, Adoboli went home to compose an email accepting "full responsibility for my actions and the shit storm that will now ensue" and apologising for putting the bank at risk.

The prosecution portrayed Adoboli, whose combined salary and bonus rose from £30,000 to £360,000 during eight years with UBS, as a reckless gambler obsessed with his status as a rising star and desperate to boost his bonus. From late 2008 he began making secret deals on the exchange traded futures desk, exceeding his daily limits and failing to make matching hedged trades, a requirement that restricts profits but, crucially, caps possible losses.

Adoboli initially accrued substantial profits, which were lodged in a secret account he called his "umbrella" and drip-fed back on to the regular books. But as European markets hit turmoil in the summer of 2011 the trades began to make a loss, which he desperately attempted to recoup with ever-bigger punts.

Giving evidence, Adoboli insisted his colleagues knew about the umbrella – an account supported in part by emails and electronic chats with fellow traders – and said UBS bosses placed him under enormous pressure to increase profits, whatever the means.

But Stokes, from City police's economic crime directorate, said Adoboli was "a rogue trader who committed systematic unauthorised trading".

"When challenged by colleagues within UBS, he tried to cover his tracks and lied about the true nature of his activity. He was trusted. He abused that trust. He lied and cheated to his colleagues but eventually justice caught up with him."

Adoboli's sentencing is by no means the end of the story for UBS, for whom the trial has been a PR disaster.

The bank's chief executive, Oswald Gruebel, stepped down in the wake of Adoboli's losses and a subsequent restructuring of its investment banking activities could result in the loss of more than 10,000 jobs. UBS is also being investigated by the Financial Services Authority and the equivalent Swiss watchdog, Finma, over how the bank's controls allowed a single trader to lose so much money.

At the dramatic nine-week hearing, Adoboli was described as a gambling obsessive who worked long hours and devoted much of his leisure time to financial spread-betting. He lost £123,000 in the year before his arrest and, despite his huge income, was forced to take out a series of short-term payday loans.

Adoboli, who sat with his legal team rather than in the dock so he could advise them on the many technical terms used, wept repeatedly when he first gave evidence, saying he had been devoted to UBS and only wanted to help the bank survive market turmoil.

But prosecutors described him as someone who "believed he had the magic touch" and endlessly increased his bets. Sasha Wass QC said: "On 14 September last year his system crashed like a car hitting a wall at high speed. Due to a series of events that had been building up over the previous few weeks, Mr Adoboli's pyramid of fraud collapsed. He was left with no choice but to admit exactly what he had been up to."

Source: The Guardian UK, Tuesday 20 November 2012