Britain's greediest banker cost $7.7b

By Cahal Milmo

Quaker-educated London trader wanted to be a star but became the country's biggest fraudster.

In January 2008, times were good for Kweku Adoboli.

The financial crisis had yet to bite and after a rapid rise through the back office of Swiss banking giant UBS, he had made it on to its London trading floor along with a high-octane lifestyle of graft, six-figure salaries and penthouse parties.

Such was the growing ease of the Ghanaian-born son of a United Nations diplomat in the sharp-elbowed world of City traders that he laughed off the fate of Jerome Kerviel, the Frenchman whose disastrous gambles had brought Paris-based Societe Generale to the brink of collapse with losses of €4.9 billion ( $7.7 billion).

With the financial world abuzz at news of the hubristic fall of Kerviel and his "off the book" trades, Adoboli was emailed by a friend pointing out an article jokingly putting the Frenchman's losses down to the "stress" of what in macho City terms was his laughably short 30-hour working week.

The reply of Adoboli, then 28, was laced with schadenfreude: "It brings so much joy, this story. And to think, he does exactly what ... I do."

On September 15 last year Adoboli, who despite earning £360,000 ($704,000) a year was having to make use of payday loans after running up huge debts on online spread betting sites, was arrested for a vast fraud that sent shockwaves through the City and wiped £2.3 billion from the UBS share price.

The trader, whose friends and managers alike had tipped him for the top, had become a gambling addict whose reputation was built on ever-increasing recklessness as he tried to conceal the gap between his image as an unstoppable profit machine and the reality of a man willing to destroy himself - and nearly his bank - to maintain his "star" status.

Adoboli, who had sent his bosses a so-called "bombshell" email admitting to running up huge losses hours before his arrest and apologising for the subsequent "s*** storm", was found guilty of the largest fraud in British history after he gambled away £1.4 billion of UBS money and left the bank with a total exposure of £7.5 billion.

The trader was sentenced to seven years in jail after a jury at Southwark Crown Court, south London, found him guilty of two charges of fraud after a 10-week trial. Adoboli, 32, who had insisted he was encouraged by his bosses to take risks for a bank and colleagues he considered to be his "family", was cleared of four separate charges of false accounting.

As the trader cried openly in court, Mr Justice Keith told him: "Whatever the verdict of the jury you would forever have been known as the man responsible for the largest trading loss in British banking history. Your fall from grace as a result of these convictions is spectacular. The fact is you are profoundly unselfconscious of your own failings."

Detective Chief Inspector Perry Stokes, who led the investigation, described Adoboli as "one of the most sophisticated fraudsters" ever seen who had hidden behind an outward appearance of diligence. "Behind this facade lay a trader who was running completely out of control. Rules were being bypassed and broken by a young man who wanted it all and was not willing to wait. When Adoboli's pyramid of fictitious trades exceeded trading limits and non-existent hedging came crashing down, the repercussions were felt in financial centres around the world."

Such was the enormity of the trader's losses that the custody sergeant filling in the details of the charges against him had ask how many zeroes there were in a billion. As prosecutors put it, he had been "a gamble or two away from destroying Switzerland's largest bank".

In January 2008, these events were unthinkable to Adoboli and those who surrounded him. Prison was the last place that the trader, who within 12 months would see his salary double to £100,000 and his annual bonus rocket six-fold to £95,000, saw himself ending up.

Adoboli, who told his trial that his school had taught him "a lot great values" about the value of community, did not fit the stereotype of the grasping, ego-driven profit hunter. In his own mind, he belonged far more to a class of urbane technocrats, more excited by the process of shuffling millions around global capitalism's chess board than pure gain.

John Adoboli, who attended each day of his son's trial, said Kweku and his three sisters had been schooled not to worship wealth above everything. "This is not our way of life. I brought them up to be God-fearing and to appreciate decency."

After joining UBS from university and serving an apprenticeship in the "back office" of the bank where he obtained an intimate knowledge of its accounting and regulatory procedures, he had been promoted to its "front office" and a post on the obscure Delta One desk dealing in an exotic financial instrument known as Exchange Traded Funds (ETFs).

From a typical day's trading up to his desk's official US$100 million limit, Adoboli and his colleagues could be expected to make their employer a minimum of £30,000 profit.

Two months after the downfall of Kerviel, Adoboli was appointed an associate director of the ETF desk, a position which would fund a succession of "bling" rented flats in trendy east London costing £1000 a week as well as a lifestyle that included touring trendy nightspots.

But behind the facade of expert knowledge of the ebbs and flows of global capitalism that allowed him to trade ETFs - essentially grouped holdings which track different types of equities, bonds or commodities - with apparent panache, Adoboli was beginning to adopt the tactics of the very man whose disgrace he had been luxuriating in months earlier.

Kerviel, who was eventually sentenced to three years' imprisonment, had sought to conceal unauthorised "off book" trades by creating fictitious counter-transactions to "hedge" or balance his accounts. The Frenchman was in effect running his own shadow bank, conducting transactions from a secret fund which eventually exceeded the market capitalisation of Societe Generale itself.

In November 2008, Adoboli began to mimic the man he had derided.

He began to exceed his trading limits and make unhedged investments which he explained away by arbitrarily extending the dates on which his deals were to be settled.

He was also accused of concealing his losses by setting up a secret fund to hide his own "off book" trades with the aim of concealing unauthorised deals and generating additional profits which could offset losses and meet the rising cost of managing ETF trades.

Adoboli called this mechanism his "umbrella" and by the end of 2010 it contained a surplus of US$40 million ($49 million), reflecting the wider success of its operator, who had been promoted to joint director of the Delta One desk with a salary of £100,000 and a bonus of £250,000.

However, the trader was cleared of false accounting after he insisted that his fund - and, crucially, its alleged use to bend UBS rules on trading limits - was known to his colleagues and his bosses, who acquiesced when his desk was successful and left him holding the can when it all went wrong.

UBS paid for a legal team to listen to the entirety of the trial.

With his younger colleague John Hughes, Adoboli found himself between 2007 and 2009 in charge of a US$50 billion portfolio. The two men, in the words of Adoboli, "were two kids trying to work out how to make this work".

In 2010, the Delta One desk earned £5.5 million but by 2011 this had risen to £33 million in a single quarter. On one particular day last year, the unit posted a profit of nearly £4 million.

Adoboli told his trial that his team was so familiar with the existence of his rainy day fund that it was referred to as "Rihanna", whose hits include a song called Umbrella.

By last July, things were starting to go badly wrong for Adoboli and "Rihanna" was turning into a uncontrollable financial gorgon which by the time of his arrest meant UBS was exposed to a ruinous potential loss of US$12 billion (£14.7 billion).

Adoboli had built up an immense bank of unhedged and unbooked trades broadly predicting a decline in values on European markets. In a single month, his losses ballooned from £2 million to £2 billion as he continued to bet vast sums in the doomed belief that eventually the market would turn and he could make good his deficit.

The jury decided Adoboli should go to prison, not for "falling off the edge" but for an ego-driven splurge.

DCI Stokes said: "What is clear from the evidence if you peel back the layers, he was breaking the rules going back to 2008.

"He was hiding losses... Once he started, he could not stop.

"He wanted to continue because he wanted to be the star of the bank."


Kweku Adoboli

*Born Ghana. Age 32. Has three sisters.

*Raised in Israel, Syria and Iraq as the son of a UN diplomat

*Educated at a Quaker boarding school in West Yorkshire

*Used bank money to gamble and sustain a lavish lifestyle, and invested recklessly.

*His father John said of his children: "I brought them up to be God-fearing and to appreciate decency."


- Independent

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