On a cool late summer evening last year in London’s financial district, with the euro-zone crisis worsening and Greece tottering on the edge of default, Kweku Adoboli says he asked the three traders who worked with him at UBS AG’s exchange-traded funds desk to join him for a drink.
Adoboli said in a post on his Facebook page that he needed “a miracle” as his bets on the market imploded. That night at a wine bar across the street from their office, Adoboli asked John Hughes, the senior trader on the ETF desk, and two junior traders, what to do.
Kweku Adoboli, a former trader at UBS AG. Photographer: Simon Dawson/Bloomberg
The others decided he should take the blame for billions of dollars in losses and an elaborate web of secret trades in what he called an umbrella account that once held $40 million in hidden profits.
“I knew I was going to lose my job anyway, I had already resigned myself to that, so fair enough,” the 32-year-old Adoboli testified last month about the meeting, which the other traders deny took place.
Two days after the alleged meeting, on Sept. 14, 2011, Adoboli told a UBS accountant that he was responsible for causing the losses, which totalled $2.3 billion once the trades were unwound, leading to one of the highest-profile banking trials in British history. Prosecutors said the risks at one point approached $12 billion and threatened the survival of UBS (UBSN), the largest Swiss bank.
Adoboli was found guilty of fraud and sentenced to seven years in prison yesterday after a two-month trial at a London criminal court. Judge Brian Keith said Adoboli had to serve at least half the sentence. He was cleared of four counts of false accounting, where he was accused of booking fake hedges to hide the risk of his real trades, and keeping profits off the books in an internal account to cover future costs of running the desk.
Evidence at the trial suggested Adoboli was driven to be a star trader and had a personal spread-betting habit. When he turned himself in, despite making 360,000 pounds ($573,000) in salary and bonus the previous year, he was in debt with three overdrawn bank accounts.
Sasha Wass, the lead prosecutor, called Adoboli arrogant, reckless and an “accomplished liar” who “played God” with the bank’s money to boost his ego and wallet through larger bonuses.
The case also shined a light on UBS’s oversight of its trading floor. The bank, which had a team of about eight lawyers and public-relations representatives at the trial, is being investigated by U.K. and Swiss regulators for failing to detect the trades over three years.
“If there’s one thing that we learned in this case, it’s that the investment-banking industry needs to take a good, long, hard look at itself,” Adoboli’s lawyer, Charles Sherrard told the judge before sentencing yesterday.
Eleven UBS employees resigned or were fired in the wake of the trading loss. That includes former Chief Executive Officer Oswald Gruebel and the co-heads of global equities, Yassine Bouhara and Francois Gouws. Chief Financial Officer Tom Naratil testified during the trial that while 550 job cuts last year weren’t directly linked to Adoboli, “a loss of $2.3 billion would affect staffing levels.”