City Rogue Trader Kweku Adoboli Arrested over $2bn UBS Loss

Jonathan Sibun and Jonathan Russell, Telegraph (London), September 15, 2011

Mr Adoboli worked in the bank’s exchange traded funds (ETFs) business and was arrested early this morning.

In a statement the police, who declined to confirm the trader’s identity, said: “A 31-year-old man was arrested at 3.30am in central London on suspicion of fraud by abuse of position. He remains in custody.”

Records from the City regulator suggest Mr Adoboli joined UBS as a trainee in March 2006. The bank is one of the City’s major institutions, with 6,000 staff in the UK and 65,000 worldwide.

Mr Adoboli was hired by UBS after studying at the University of Nottingham, where he worked as communications officer from 2000 to 2001.

The landlord at Mr Adoboli’s former £1,000-a-week apartment in Shoreditch, east London, described him today as a “nice guy”.

Philip Octave, 42, said he moved out of the flat–just a few hundred yards walk from UBS’s London headquarters–“about four months ago” after living there for “about two-and-a-half years”.

“He was a very nice guy, very polite. He would speak to anyone. I don’t have a bad word to say about him,” Mr Octave said.

“He had a girlfriend who I met once. He wasn’t the tidiest person, but he was a good tenant. His girlfriend was a nurse I think, she was a long-term girlfriend. I don’t know where he has moved on to.”

Shares in the bank plunged as much as 9.6pc in Switzerland on the news.

The bank said in a statement: “UBS has discovered a loss due to unauthorised trading by a trader in its Investment bank.

“The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of $2bn.”

The bank said that it may also be forced to report a loss for the third quarter due to the unauthorised trade. UBS assured clients that their positions were not affected.

“It is amazing that this is still possible,” said ZKB trading analyst Claude Zehnder. “They obviously have a problem with risk management. Even when the amount isn’t so high it is once more a loss of confidence that casts UBS in a poor light.

“With this they are losing a lot of credit that they had regained with effort,” he said.

Regulators in London and Switzerland are currently striving to establish whether the activity took place in UBS’s London incorporated bank or its separate Swiss branch operating in London. If it turns out to be the former UK regulators will lead the investigation. If it is the latter it could be the Swiss who control proceedings. The two regulators are understood to be in close contact.

In a memo to staff, the bank tried to calm concerns about the rogue trader’s actions. “Although this news is unfortunate, it does not affect the fundamental strength of our business,” management wrote in an internal email.

The Vickers report this week recommended that banks separate their retail businesses from their riskier investment banking operations to protect despositors in a financial crisis.

The announcement is a major blow for UBS which had started to see client confidence return this year after it had to be rescued by the Swiss state in 2008 following massive losses on toxic assets held by its investment bank.

Last month UBS announced plans to axe 3,500 jobs to shave SFr2bn (£1.45bn) off annual costs as it joins rival investment banks in reversing the post-crisis hiring binge and preparing for a tough few years.

Investment banks worldwide have been hit by slow trading due to the debt crisis in Europe and the US, as well as stricter regulations forcing banks to hold more capital to protect them from future financial crises.

Chris Roebuck, visiting professor at Cass Business School, said: “The news that a trader at UBS has been able to blow £1.3bn is a staggering demonstration that all the clever systems that the banks now have, especially after the financial crisis, still cannot stop a determined individual getting round them if they want to.”

“It will yet again confirm to the majority of shareholders who are Swiss that investment banking is not “proper” banking as private banking is and that it is, just as Vince Cables says, “casino” banking.”

Switzerland’s financial markets regulator FINMA is in close contact with Swiss bank UBS over the unauthorised trading.

“UBS immediately informed us. We have taken note of the case and we are in close contact with the bank,” a spokesman for FINMA said.

KwekuAdoboli.jpg

Kweku Adoboli

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  • Wild Bill

    This news item is simply a concoction. There is no possibility of a rouge trader doing this much damage to a bank.

    The story is being circulated to cover another inside job / bank robbery. The black man is a patsy. The white Swiss stockholders get the shaft.

  • Tim Mc Hugh

    Yeah, two billion is a tidy sum. Here`s how I ALMOST lost 15 dollars today… I made the mistake of disregarding the advice about having anything to do with these folks. The price I did pay was a laugh so hard it aggravated my hernia condition.

    I was walking in the local Wal-Mart when I was approached by a “youth” asking if I had change for a “dolla.” I brushed him off, then relented because I saw him walking from near the bus stop. I put myself in his situation and thought what the hell, “Did you need change for the bus?!?!” I asked. “Uhhh, yeah!” he replied. I dug in my pocket and pulled out four quarters. I then held out my hand for his money before I gave him mine. Instead of proffering it, he held it thumb up against the denomination silently showing me it was a five. I laughed so hard, I hurt myself. I thought to myself, “So this is how the delicate dance begins to turn five into ten and then ten into twenty!!” Seriously, Have you EVER had a guy ask for change for a buck when he`s holding a five?!?! When I came out he was being helped by another good Samaritan but they both seemed confused by the bills spread out on the hood of the man’s car!! As I drove off I thought back to the time I had spotted a hippie pickpocket ring on a trolley seconds before someone yelled out they had been robbed. My buddy wanted to know how I knew before it even went down. I told him, “No 17 year old girl in the history of the world has ever tried to get closer to an over 50 year old man in a crowd.” Upon further reflection I realized that the fare for said bus was no longer forty or even seventy five cents… It`s now, wait for it… a dollar!

  • only racists fear the dark

    As unfortunate as this small setback is, it would be even more of a tragedy if our diversity and inclusion progress were to take the same hit our stock took today. Our diversity, not only at our company, but in all Switzerland and Europe, is a strength. And as horrific as this predictable $2,000,000,000 loss to diversity was, if our diversity becomes a casualty, I think that’s worse. Our shareholders are committed to see us be a leader in diversity and inclusion, and if we occasionally lose $2,000,0000,000 in making us a stronger company, we are willing to suffer for the greater good.

    We must recognize that we haven’t done enough to reach out to our minority traders with the same cultural competence that we do for those who look like us, and our failure no doubt led to frustration and confusion, and possibly even Internalized Racist Oppression, that caused our diversity affirmative action African trader to accidently press the wrong button as he struggled with the oppressive inequities and unjust systemic bias and institutional racism that still infects our company. We will embrace this as a lesson learned that we need to do more.

    And we condemn Race Realists who spout nonsense like this: “I suppose in Brownstein’s ideal world, Whites would cut back their benefits from Social Security and Medicare in order to fund educational programs for non-Whites. But, as all the research shows, people are less willing to contribute to public goods in ethnically non-homogeneous societies—especially when the beneficiaries are uninvited guests of different ethnicity. Brownstein is blissfully ignorant of all the social science research, whether on race differences in academic potential or on the disastrous consequences of multiculturalism.”

    http://goo.gl/GCa4h

    If any of our White shareholders don’t think they deserved to take a 10% devaluation hit to their White Privilege today, we demand that they undergo NAACP Deep Therapy for their implicit and unconfessed racism. Only through more sensitivity training in multicultural understanding can we expect them to become good world citizens who used their capital to foster diversity and help minorities. Until they feel that they have truly made a personal investment in atoning for the sins of segregation by holding themselves accountable to people of color for their unearned White Privileges, we can only say that we are ashamed that they ever purchased our stock. We’d rather have a lower White Privilege value than allow them to profit from their racist White Privilege. Diversity will help us level those who horde their White Privilege down to Equality with those who don’t deserve any.

    The best outcome we can hope from this setback is that rich Whiteys will not have enough money in our stock to send their kids and grandkids to White Flight academies in Dixieland where diversity and inclusion are not institutional values and systemic policies.

    Yes, we know that our stock was above $60 in 2007 and that it closed at $11.41 today, but those losses are easily absorbed when diversity and inclusion are the real goals. Sometimes it’s more important that society profit instead of White shareholders.

    Yes, we know that our stock was above $60 in 2007 and that it closed at $11.41 today, but those losses are easily absorbed when diversity and inclusion are the real goals. Sometimes its more important that society profit instead of White shareholders.

    And don’t give us any of that racist nonsense that “if you added up all the profits from your diversity employees, did they ever total $2,000,000,000 of net worth, or was this $2,000,000,000 diversity cost on top of other billions for the costs of diversity and inclusion?” Only racists would ask questions like that, and we don’t talk to racists.

    http://www.ubs.com/1/e/about/diversity.html

    “UBS is unwaveringly committed to, and actively works to foster, an inclusive corporate culture. Diversity is an important ingredient to being able to reach out to our clients in a meaningful way.”

  • je suis paganisme

    I suspect that his “underlings” had been covering for him, but finally stopped doing so, and probably some time ago, at that.

    Europeans get tired of propping up incompetents.

    PS–this guy is either drunk out of his mind, or he has a serious problem with his right eye and left upper lip.

    But . . . the “inside” is always eventually made manifest on the “outside.” So he may not even matter if he was drunk.

    As above, so below. Blessed be.

  • PMN

    Hard lesson in diversity hiring.

  • Question Diversity

    Coming soon to a country near you. Dodd-Frank requires more diversity and affirmative action in the hiring practices of financial and investment firms. Wall Street will soon be full of people like Kweku Adoboli. There goes the neighborhood.

  • GetBackJack

    I agree with #1 Wild Bill. But, I also admit I hope its true. The more these diversity maniacs get hurt by their own ignorance, the better. They are traitors and traitors do not deserve sympathy nor emmpathy.

  • SKIP

    “Europeans get tired of propping up incompetents”

    NO! apparently they do not, nor do a tremendous number of Americans who, in the main, are FORCED to prop up incompetents.

  • Anonymous

    He beat Nick Leeson, who lost £827 million (US $1.4 billion) in fraudulent, unauthorized trading, and caused the collapse of Barings Bank.

  • Hazel-Eyed Devil

    Just by glancing at his photo I can tell that Kweku Adoboli is a financial mastermind. It must be difficult indeed for a genius of his caliber, upon spotting the opportunity for a scam of two BILLION dollars NOT to yield to that enormous temptation.

    Just look at that face, with its keen intelligence and its calculating shrewdness clearly on display. Why, you can almost hear the myriad gears of his brain whirring and whizzing around at lightning speed just behind those soulful eyes. His IQ must be stratospheric. (Well, either that or he was an affirmative-action hire. I’m sure it’s one of the two.)

    Yes, we would all prefer that Kweku were as honest as he is brilliant (and handsome), but the chance at a payday in the billions is enough to turn any good man bad. So judge him not. Despite his petty pilfering, Mr. Adoboli nonetheless remains a positive and much-needed role model for disadvantaged inner-city youth to finally enter the world of high-finance, a world hitherto forbidden to them due to White Skin Privilege… or The Legacy of Slavery… or The Never-Ending Pain of Colonialism… or, um, something like that.

  • down the bayou

    I like # 3_only racist fear the dark’s post.

    I am so glad that I do not own stocks or assets. I can speak freely about race because I can’t be fired from being a housewife. I don’t have anything of any value, and so I am free.

  • Anonymous

    SOMETHING is very, very, seriously WRONG with a company that allows a guy like him the means to defraud them of $2,000,000,000.00. Where were the auditors? The accountants? Who was managing him? Who oversaw his work? How was he able to even obtain access to such a colossal sum of money. Who signed off on it? Where are the control-systems in place? Believe me there is a lot more to this story then we have heard so far. The entire chain of command is to blame. The culture of work and authority at this bank must be a complete joke. After ING took over Barings bank, they did a private internal study to find out what went wrong. Following it, they fired just about every single manager at the whole bank. They totally cleaned house. The fish rots from the head down.

  • Anonymous

    Another news story says that it was not UBS that discovered the loss. It had to be pointed out to them by the perp.

    The perp, by the way, is the son of a retired UN worker. He learned from daddy that the public’s money is meant to be squandered.

    He also has the same lawyer as Nick Lesson in the Barings Bank case. Apparently, they both have the money to afford high-priced lawyers.