Kweku Adoboli’s Story – Three Years of Fraud and “Book Baking”

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on Sep 20, 2012

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Kweku Adoboli’s Story – Three Years of Fraud and “Book Baking”

On September 10, one year later after his arrest, the trial against former UBS trader Kweku Adoboli finally began. Mr Adoboli is accused of losing his bank $2.3 billion – the largest unauthorised trading loss in British history. The 32-year old appeared in court visibly calm and pleaded not guilty to two charges of fraud and two charges of false accounting for the period between October 2008 and September 2011.

The prosecutors have piled up insurmountable evidence supporting the case that the former trader was “a gamble or two away from destroying Switzerland’s largest bank”. At one point UBS was in danger of losing $12 billion, a sum high enough to ruin the bank.
Mr Adoboli’s fiasco began in 2008 when he was promoted to associate director of UBS’s exchange traded funds (ETFs) desk, giving him enough authority to start “baking” the books. His knowledge of UBS’s back-office system helped him make unhedged investments and hide the profits in a “slush fund”. According to prosecutor Sasha Wass, the former UBS employee conducted himself as not simply a rogue trader but a master fraudster and deceiver. His initial profit of $30 million (£18.5 million) helped him get a pay raise from £65,000 in 2008 to £360,000 in 2010 and increased his bonuses more than 16 times to £250,000. His success however was all on a back of a lie.

!m[](/uploads/story/425/thumbs/pic1_inline.png)In August 2011 William Steward, the UBS back office accountant, had already become suspicious of Mr Adoboli’s deals and questioned him on why his books did not balance – he received no definite answer. On September 14, Mr Steward confronted the rogue trader once again, asking him to provide the names of the counterparties on his deals. An hour later, the accountant received an email titled “An explanation of my trades” where he fully confessed of his fraudulent actions. The email ended with a note of regret:

“I take responsibility for my actions and the s**t 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.”
Mr Adoboli was summoned to meet with his direct supervisor Ronald Greenidge and following two more meetings in the morning of 15 September, the police was called in to make the arrest.

More details about Mr Adoboli’s personal finance have been disclosed this week. The trader managed to lose £123,000 on a spread betting account with IG index. UBS was aware of his trading activities outside of work and warned him twice with possible disciplinary action. Even after the bank forbid spread-betting for its traders in May 2011, the rogue trader continued through a rival spread-betting company – City Index. Just after he squeezed out £18,700 in profits, he got arrested.

Despite being credited with £360,000 in pay and bonuses in 2010, Mr Adoboli’s Natwest Bank Account was still £3,594 overdrawn when he was detained in September last year. His primary account showed payments to a number of pay-day loan companies including Pounds to Pocket, Payday UK, Wageday Advance and Wonga.com. Across his two credit cards and four bank accounts, the former trader owed £4,181.
The last thing the 32-year-old posted on Facebook before the police took him in custody was “need a miracle”. With the amount of evidence piled up against him, he is probably right. If convicted, Mr Adoboli could serve up to 10 years in jail.