November 20, 2012 / 2:03 PM / 7 years ago

UBS rogue trader: the man, not the machine

LONDON (Reuters) - Kweku Adoboli, convicted on Tuesday of the biggest fraud in British history, was a star trader at Swiss bank UBS until he admitted booking fictitious deals to hide the losses.

In a bombshell email of September 14, 2011, that owned up to the losses, he didn’t mention figures, but he had hidden short positions in Eurostoxx and DAX index futures worth a staggering $8.75 billion.

After UBS frantically unwound the positions, the third-biggest “rogue trading” scandal in history had lost it $2.3 billion.

“I will expect that questions will be asked as to why nobody was aware of these trades,” Adoboli wrote in the email. “I take responsibility for my actions and the shitstorm 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.”

At his trial a year later for fraud and false accounting, the story had changed.

Far from acting alone, he had “learnt his behavior” from other traders at a bank where bosses encouraged rule-bending in pursuit of profits, and colleagues and line managers knew what he was doing.

For eight grueling days in the witness box, he was confident and articulate. It was easy to see why, in happier times, UBS picked him for their “Ascent” program for future leaders.

He was also passionate.

“UBS was my family, and every single thing I did, every single bit of effort I put into that organization, was for the benefit of the bank I was so proud to work for,” he said on the first morning, sobbing and thumping the box.

Such was his commitment, he said he had slept under his desk on several occasions and even missed his grandmother’s funeral.

Managers pushed him to take big risks, he said, railing at “the machine” that singled him out for blame when all he had done was try to make the profits they wanted.

Yassine Bouhara, then co-head of global equities, told him in April 2011 “you do not know that you have pushed the boundaries far enough until you get a slap on the back of the wrist”.

“My slap on the wrist is this trial,” said Adoboli. Bouhara was among several senior managers including Chief Executive Oswald Gruebel who resigned after Adoboli’s arrest.

Adoboli said he had worked closely with the three other traders on the Exchange Traded Funds (ETF) desk, and people in accounts and trade support had known how he operated.

Prosecutor Sasha Wass dismissed him as a devious liar who secretly gambled with the bank’s money in the arrogant belief he could make bigger profits and be a star trader.

Wass played the jury recordings of three phone calls between Adoboli and back-office accountant Will Steward on August 24, 2011. They heard Adoboli give long, complicated but false explanations for accounting problems Steward queried.

The truth was that since late June he had made huge losses on billions of dollars of secret trades, despite official risk limits of $100 million intraday and $50 million overnight.

He flipped from a short to a long position on July 1, but it went badly wrong as markets fell on worries about the euro zone and the U.S. debt ceiling crisis.


The concealed risk exposure from his trades had risen from $1.5 billion on June 30 to a peak of $12 billion on August 8.

He said he was “buying the dip” in the hope of a market bounce under advice from colleague John Hughes, and burnout had “de-sensitized” him to the numbers.

He admitted his book-keeping became messy, hence a growing number of queries from the likes of Steward in the back office, and he lied to buy time to recoup the losses.

But the big market move he needed never happened.

On September 14, an increasingly anxious Steward asked Adoboli for the names of the counterparties to some of the problem trades. There were no counterparties.

“He was about to be caught with his pants down,” prosecutor Wass said.

He left the office and sent the bombshell email to Steward, copying in his boss John DiBacco. He was called back in, arriving at 3:45 p.m for meetings with managers and later lawyers until the police were called after midnight. At 3:35 a.m. he was arrested.

He spent nine months in Wandsworth Prison until granted bail in June 2012.

On the anniversary of the notorious email, Wass opened the prosecution’s case, painting Adoboli as a gambling addict on a losing streak who kept increasing his bets in the desperate hope his number would come up.

Despite an annual salary of 110,000 pounds ($175,000) and a last bonus worth 250,000 pounds in cash and shares, he was broke.

He lost 123,000 pounds on spread-betting in the year before his arrest and took short-term loans from firms like and Moneybox.

“You were not able to live on your enormous salary because you could not stop yourself from gambling,” Wass said.

Spread-betting, Adoboli countered, was common among City traders, “like a taxi driver driving his own taxi home”.

Though found guilty of fraud, the jury was to find him not guilty of the four false accounting charges, for which they needed to be certain he acted for personal financial gain.


The defense team produced transcripts of electronic chats between Adoboli and others at UBS that they said showed he was open about his methods and no questions were asked while he made profits.

“Have you used the slush account?” asked a trader from another desk, Darren Bailey, on March 23, 2011.

The defense said this was a reference to Adoboli’s “umbrella”, an accounting trick he had developed since 2008 to build up a hidden profit pool to smooth out fluctuations.

Adoboli said Bailey was among many traders with such systems, though Bailey said he was “genuinely shocked” by the slush account chat and did not remember what it was about.

Several back-office staff were also confronted with chats the defense said showed they knew about Adoboli’s methods.

On April 26, 2011, Adoboli told back-office contractor Johannes Zuidmeer he had made a “cosmetic adjustment” to a booking. Zuidmeer did not question this. On August 11, Zuidmeer let Adoboli hold back $1 billion in losses so he could rectify a booking error.

“With the benefit of hindsight it looks serious,” Zuidmeer said, but he denied knowingly aiding Adoboli.

Wass said the chats were “meaningless, vague and ambiguous” and spun to support a defense cooked up after Adoboli’s arrest.


The defense’s main target was Hughes, the other senior trader on the ETF desk, who was sacked after Adoboli’s arrest for failing to adequately supervise him.

For three days, Hughes was confronted with dozens of chats that showed he embraced the concept of the umbrella.

“All I can say is thank fuck for your umbrella,” Hughes told Adoboli in January 2011 when the desk had made losses.

But Wass said another chat from March showed Hughes may have gone along with it, but he knew it was wrong.

“Your umbrella’s going to get us both fired,” it read.

Hughes mumbled and fiddled with his long blond hair as lawyers struggled to get clear answers. The son of a builder, he said he went into trading to make money and pay his debts.

He didn’t take the job too seriously, leaving every day at 5pm. He ignored 17 requests from the compliance department to complete training in supervisory duties.

Adoboli said all four of the desk traders, including Hughes, met at a bar on the evening of September 12 to decide who was going to carry the can for the losses. When the meeting ended he lamented in a text to his girlfriend that “the boys have sold me down the river”. UBS office records show all four left the office together and returned an hour later that evening, but the three said they had no memory of such a meeting.

On September 14, when Adoboli texted his girlfriend during his long night confessing to management, he told her: “There’s a problem with my story that I acted on my own. It just doesn’t hold water.”

His girlfriend texted back that he should not tell any further lies to protect others.

Evidence showed Hughes booked several fictitious trades of his own in June and July 2011, using the same method.

Acceptance of the umbrella by the “shambolic” and “irresponsible” Hughes, said Wass, could not be presented as approval by UBS management.


Adoboli’s most recent line managers also took the stand.

Ron Greenidge, who supervised the desk until April 2011, was sacked for failing to properly supervise Adoboli, but he defended the bank, denying that management encouraged dubious practices.

DiBacco, who took over supervision from Greenidge and was also sacked, dismissed suggestions that he encouraged traders to ignore rules as “crap”.

The defense presented a June 23 email in which Adoboli told DiBacco the trading position that day hit $200 million, making $6 million profit.

“Thanks for the update. Well done,” DiBacco replied. Seconds later he sent another email: “When over $100 million and certainly $200 million I need to know before not after ... If the PnL (profit and loss) had gone the other way I don’t want a lot of crap coming down on you alone.”

Adoboli said the first email showed management didn’t care about risk limits, and the second was a back-covering exercise. DiBacco angrily denied it.

One question that arose repeatedly was why Adoboli acted as he did when the case of Jerome Kerviel, a trader who lost $7 billion at French bank Societe Generale, was so fresh.

Adoboli said he and Kerviel were in trouble for one reason only: losing money, the only unforgivable crime in banking.

“To think that he does exactly what Hughesy and I do,” Adoboli mused in an email to friend Sarah Moore in 2008 after the Kerviel story broke.

“Please don’t let me read about you in the papers in the same fashion,” Moore responded.

($1 = 0.6302 British pounds)

(This article contains profanities included in witness quotes)

Editing by Will Waterman

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