E former UBS trader Kweku Adoboli, whose unauthorised trades lost the Swiss bank $2.3bn (£1.4bn), was yesterday jailed for seven years after being convicted of one of the biggest frauds in British history.
Adoboli, once pegged as a rising star on the Exchange Traded Fund desk at the bank’s Finsbury Avenue offices, was found guilty on two counts of fraud by abuse of position. He was cleared on four counts of false accounting with a view to gain for himself or another.
Sentencing Adoboli to seven years, Justice Keith told the former City trader: “Whatever the verdicts of the jury would have been, you would forever have been known as the man who was responsible for the largest trading loss in British banking history.
“Your fall from grace as a result of these convictions is spectacular.”
Adoboli will serve half of his sentence on licence. Adding in time already spent in custody, it means he is set to be freed within two-and-a-half years.
Adoboli looked unmoved as the verdicts were read out. He acknowledged his father, a former United Nations diplomat from Ghana, and uncle, sitting behind him in the public gallery as he was led away.
Adoboli was arrested by City of London police last September at UBS’s offices after the bank uncovered huge discrepancies in trades booked by Adoboli.
In a “bombshell” email sent from Adoboli the day before, he admitted to fabricating counterparties in the ETF ledger to cover up losses he was making in off-book trades.
The losses to the bank were calculated at $2.25bn. Shares in the Zurich-based bank subsequently dropped 10 per cent when the loss was announced.
“The amount of money involved was staggering, impacting hugely on the bank but also on their employees, shareholders and investors,” Crown Prosecution Service deputy head of fraud Andrew Penhale said. “This was not a victimless crime.”
DCI Perry Stokes, from City of London police, said: “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.”
A UBS spokesman said it was “glad” criminal proceedings had finished.
THE BOMBSHELL EMAIL SENT BY ADOBOLI
First of all, the ETF trades that you see on the ledger are not trades that have been done with a counterparty as I have previously described. I used the bookings as a way to suppress the PnL losses that I have accrued through off book trades that I made. Those trades which were previously profit making, became loss making as the market sold off aggressively through the aggressive selloff days of July and early August.
Initially I had been short futures through June and those lost money when the first Greek confidence vote went through in mid June. In order to try and make money back I flipped the trade long through the rally. Although I had a couple of opportunities to unwind the long trade for a negligible loss, I did not move quickly enough and the market weakness on the back of the first bad macro data and then an escalating Eurozone crisis cost me the losses you will see when the ETF bookings are cancelled. The aim has been to try and make the money back before the September expiry came through, but clearly that has failed. There are still live trades on the book that will need to be unwound. Namely a short position in DAX Futures (which have been rolled to December expiry) and a short position in S&P 500 Futures that are due to expire on Friday. I have now left the office for the sake of discretion. I will need to come back in to discuss the positions and explain face to face, but for reasons that are obvious, I did not think it wise to stay on the desk this afternoon.
I fully expect that questions will be asked as to why nobody else was aware of these trades. The reality is that I have always maintained that these were EFP trades to the members of my team, BUC, trade support and John DiBacco. I take full responsibility for my actions and the shit storm that will now ensue. I am deeply sorry to have left this mess for everyone and to have put my bank, and my colleagues at risk.
Promoted to trader at UBS. Moves to ETF desk
UBS re-organises divisions. Adoboli earning £110,000 and a £250,000 bonus
15 SEPTEMBER 2011
Adoboli is arrested by City of London police at office 3am and charged.
Adoboli joins UBS investment bank’s operations department as a graduate trainee on £30,000 pa
Adoboli becomes director in role as a trader on UBS ETF desk. He earns £110,000 and a bonus of £95,000
14 SEPTEMBER 2011
Adoboli leaves UBS building at 1.30pm and sends ‘bombshell’ email disclosing trades. He returns at 3.45pm
Adoboli goes on trial at Southwark Crown Court on four counts of false accounting and two of fraud
THE WORLD’S BIGGEST TRADING LOSSES
Daiwa Bank bond trader Toshihide Iguchi (r) was responsible for £1.1bn of losses at the Japanese bank over 11 years
Sentence: Four years at Allenwood prison camp
Baring’s Bank collapsed after derivatives trader Nick Leeson (r) lost $1.3bn while working in its Singapore office
Sentence: Six-and-a-half years in Changi Prison, Singapore
1997 - 2002
Allfirst (then part of Allied Irish Banks) currency trader John Rusnak (l) hid $691m of losses
Sentence: Seven-and-a-half years
Societe Generale trader Jerome Kerviel (l) lost €5bn through unauthorised trades
Sentence: three years in prison (plus two suspended) and a €4.9bn fine