View Full Version : Why Kweku Adoboli Referred By The British Press As A 'Rogue Trader' Is On Trial

16th September 2012, 11:06 PM
A City trader who believed he had a ‘magic touch’ gambled away £1.4 billion in Britain's biggest ever alleged banking fraud, a court heard today.

Investment banker Kweku Adoboli, 32, allegedly invented fictitious accounts to conceal the massive losses he was making at Swiss bank UBS from risky deals.

Southwark Crown Court heard the ‘rogue trader’ was ‘fraudulently side-stepping’ his bank’s rules but then cooked the books to make it look as if the money he was gambling had been balanced by cash coming in.

Handcuffed: Kweku Adoboli, 32, is accused of two counts of fraud and two counts false accounting over the course of two years while working at UBS

His losses totalled £1.4billion – wiping around 10 per cent or about £2.8billion off UBS’s share price.He is accused of two counts of fraud and two counts of false accounting while working for Swiss bank UBS between October 2008 and last September.

Prosecuting, Sasha Wass QC said: ‘He is on trial because he lost his bank $2.3 billion (£1.4 billion). He fraudulently gambled it away. He also in doing so wiped around 10% or about 4.5 billion US dollars (£2.8 billion) off the bank's share price.

‘He did all of this by exceeding his trading limits, by inventing fictitious deals to conceal this and then he lied to his bosses.

‘Mr Adoboli's motive for this behaviour was to increase his bonus, his status within the bank, his job prospects and of course his ego.

‘Like most gamblers, he believed he had the magic touch. Like most gamblers, when he lost, he caused chaos and disaster to himself and all of those around him.’

Adoboli, from Whitechapel, east London, is accused of losing the money in Britain's biggest alleged banking fraud.

He worked for UBS's global synthetic equities division, buying and selling exchange traded funds (ETFs), which track different types of stocks, bonds or commodities such as metals.

UBS discovered in September last year that Adoboli's deals had caused the bank a loss of £1.4 billion after ‘his fraud had unravelled’.

Ms Wass said: ‘To put the huge trading loss in some sort of perspective, 2.3 billion US dollars is enough to pay a year's salary for nearly 70,000 new nurses or two Wembley stadiums or perhaps even six new hospitals.

‘This colossal loss arose purely as a result of Mr Adoboli's fraudulent deal making, which amounted as you will see, to nothing more than gambling.’

She told the jury that Adoboli had ‘fraudulently side-stepped’ the bank's rules that banned high risk and unauthorised investments.

His bank sets a daily trading limit for the ETF desk of 100 billion US dollars while using hedging to reduce risk - buying one type of investment and simultaneously selling a similar one to mitigate any loss.

But prosecutors claim Adoboli failed to hedge several of his investments in order to make a bigger profit and larger bonus for himself.

Ms Wass said: 'When you put your life savings in a pension fund you do not expect an investment banker to gamble it on the toss of a coin. You expect him to limit the downside and maximise the growth of the investment for your old age.'

She said there was a 'fundamental difference' between a gambler and an investment banker.

'A gambler takes uncertain risks playing games of chance risking all, whereas an investment banker is investing money or making trades taking extreme care to reduce his risk as much as possible by insuring or hedging against loss when a price falls.

'The gambler relies on chance, he wins or he loses. The investment bank trader is investing to make his bank's or his clients' investments grow and he goes to great lengths to ensure that he cannot lose all or even a substantial amount of his investor's stake.

'One is trying to protect and increase wealth on behalf of others, and the other is relying on good fortune with no investment element, with absolutely no insurance.'

She said Adoboli fell into a 'gambling mindset' - describing a martingale system that involves doubling a bet after each loss to try and recoup the all the money.

She added: 'It takes very deep pockets to continue to run such a system: pockets the size of the UBS bank. It is these pockets, these resources that Mr Adoboli was using to back his bets.

'He was certain his prediction of the way the market was moving was correct and when the market moved in the opposite way and his bets lost, he simply increased his bets.

'Given the size of the unhedged bets that Mr Adoboli was undertaking, the doubling of the sums necessary to recover, the losses he was making very rapidly reached into the billions.'

She said at one stage he was at risk of losing the bank nearly 12 billion US dollars of unhedged investments.

'Rogue trader': Former UBS banker Kweku Adoboli allegedly lost his bank £1.4 billion in Britain's biggest banking fraud

‘He was lying to the bank, both to his senior managers, his risk control department, and the accounts department.

‘In effect he was risking the very existence of the bank by gambling its resources, ultimately for his own benefit.

‘Mr Adoboli had ceased to act as a professional investment banker and had begun to approach his work as a naked gambler. He had become what is sometimes referred to as a rogue trader.’

But she claimed he had gone beyond the behaviour of a ‘mere rogue trader - faking records over a two and a half year period.

Initially, the court heard he had been getting some success and was getting away with it but then 'his system crashed like a car hitting a wall at high speed' and he was forced to admit what he had been doing.

Ms Wass continued: ‘He faked bookings, he created false accounts and conducted himself as a master fraudster, deliberately and systematically deceiving and defrauding the bank which was employing him.

‘As Mr Adoboli was later to admit, he had been cooking the books and deceiving the bank since 2008: two and a half years before he was caught.’

The public school-educated former head boy worked his way up from a graduate job at the bank that he started in 2003.

He became a trader in December 2005, was promoted to associate director in March 2008 and then director in March 2010.

Moving into trading meant he had the chance to earn million-pound bonuses, Ms Wass said, and his salary rose 'dramatically' as his career progressed.

In 2007 he earned £40,000 and a bonus of £55,000, in 2008 he earned £50,000 and a bonus of £15,000.

Then in 2009 he earned £100,000 with a £95,000 bonus; then in 2010 his salary was £110,000 and his bonus was £250,000.

The rise in the final two years was because he had begun to 'fraudulently gamble the bank's money', jurors were told.

The trial continues.

Source: http://www.dailymail.co.uk/news/article-2203161/UBS-rogue-trader-gambled-away-1-4billion-biggest-City-fraud-believed-magic-touch-tried-boost-ego-bonus.html