UBS trader charged with $2B fraud

LONDON/ZURICH (Reuters) – British police charged  UBS trader Kweku Adoboli yesterday with fraud and  false accounting dating back to 2008, a day after the Swiss bank  was plunged into crisis by revealing a $2 billion trading loss.

Wearing a light blue sweater and a white shirt, 31-year-old Adoboli wiped away tears as he appeared in court in London, where he was formally accused of two counts of false accounting and one count of fraud by abuse of position.

The charges state that while working as a senior trader in UBS Global Synthetic Equities, Adoboli “dishonestly abused that position intending thereby to make a gain for you, causing losses to UBS or to expose UBS to risk of loss.”

Adoboli, the son of a retired United Nations employee from Ghana who attended school and university in Britain, spoke only to confirm his name and address and will be held until Sept. 22 when he will appear again in the same court.

“They are extremely serious charges,” said magistrate Carolyn Wagstaff.
The false accounting charges, said to have taken place between Oct. 2008 and Dec. 2009, and Jan. 2010 and Sept. 2011, said he had falsified “an exchange traded fund made or acquired for an accounting purpose” and falsified “an exchange traded fund transaction and other internal records”.
Exchange traded funds are securities that track an index, a commodity or a basket of assets, and trade on an exchange.
Adoboli, whose father said his family, was heartbroken although he had no doubts about his son’s integrity, later composed himself during the short hearing and managed a few smiles at people sitting in the public gallery of the court.
Meanwhile, UBS was in turmoil as ratings agencies warned lax risk management could prompt downgrades and senior executives cancelled engagements to meet financial regulators.

Kingsley Napley, which is representing Adoboli, declined to comment.
The law firm also advised Nick Leeson, whose $1.4 billion derivatives losses triggered the 1995 collapse of Britain’s Barings Bank. Market speculation has centred on the possibility that the UBS loss resulted from the shock decision by the Swiss central bank last week to impose a cap on the red-hot franc, sending the currency plunging and Swiss shares sharply up.

One UBS trader in London said staff were expecting news of more job cuts in the next two weeks as well as zero bonuses.

“In my team people are scared and are playing low profile. The idea is to stay there and keep your job. In the current situation, it would be difficult to find another job anywhere else,” the person told Reuters on condition of anonymity.

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