Former UBS AG trader Kweku Adoboli was found guilty of fraud in relation to a $2.3 billion loss, the largest from unauthorized trading in British history. He was cleared on four counts of false accounting.
Adoboli was convicted today following a two-month-long London trial, during which lawyers for the 32-year-old argued UBS managers pushed traders to take too many risks and rule-breaking at the bank was rampant.
The conviction means Adoboli will be mentioned in the same breath as rogue traders Jerome Kerviel, who was found guilty of causing a 4.9 billion-euro ($6.3 billion) trading loss at Societe Generale SA, and Nick Leeson, the former derivatives trader jailed for losses that brought down Barings Plc in 1995. While UBS warned investment-bank employees to report signs of illicit trading after Kerviel’s loss, Adoboli said he could only reach the bank’s goals set by ignoring such warnings.
“Behind all the technical financial jargon in this case, the question for the jury was whether Kweku Adoboli had acted dishonestly, in causing a loss to the bank of $2.3 billion,” said Andrew Penhale, deputy head of fraud at the Crown Prosecution Service. “The amount of money involved was staggering, impacting hugely on the bank but also on their employees, shareholders and investors. This was not a victimless crime.”
Wearing a navy suit, white shirt and red tie at the hearing today in Southwark Crown Court, Adoboli reacted to the jury’s verdict by nodding his head and looking down. He admitted causing the loss, but said he didn’t do it dishonestly. He pleaded not guilty.
Adoboli’s lawyer, Tim Harris, declined to immediately comment after the verdict was issued.
While the 10-member jury was unanimous in finding Adoboli guilty of one count of fraud early today, jurors didn’t reach unanimous decisions on the other five counts. Judge Brian Keith then agreed to accept 9-1 decisions and jurors returned their verdicts on the other charges.
“To be guilty of false accounting the jury had to be satisfied that he was doing it for personal gain,” said Mark Spragg, a lawyer at Keystone Law. “They could have taken the position that he was reporting up the line to people that did know.”
Keith said he will sentence Adoboli later today. In the U.K., fraud charges carry a maximum sentence of 10 years in jail, while false accounting can bring a seven-year term.
On Sept. 14, 2011, following inquiries about his trading by a UBS accountant, Adoboli left his office, went home and sent a “bombshell e-mail” describing unauthorized trades he’d made on German and U.S. futures.
“I am deeply sorry to have left this mess for everyone and to have put my bank and my colleagues at risk,” Adoboli wrote in the message to the accountant, copying two of his managers.
He was called back to the UBS office near London’s Liverpool Street train station that afternoon to answer questions and arrested early the next day. Ruwan Weerasekera, a UBS investment-bank executive, testified Oct. 9 that losses from Adoboli’s trades could have reached $12 billion.
Adoboli, who worked for UBS since leaving college, was accused of hiding the risk of his trades by booking fake hedges and storing profits in a secret account to cover the costs of running the bank’s exchange-traded-funds desk. Jurors cleared him of the charges related to the so-called umbrella account.
During the trial, prosecutor Sasha Wass called Adoboli arrogant, reckless and an “accomplished liar” who “played God” with the bank’s money for the sake of his status, ego and bonus. Lawyers for Adoboli countered that he didn’t benefit personally from the trades and his only goal was to make money for the bank and trading desk that he said replaced his family.
“In the end, the reason I’m most sad is because these losses weren’t the result of dishonest or fraudulent behavior,” Adoboli said. “These losses were the result of a group of traders who were asked to do too much, with too little resources, in a market that was too volatile.”
Adoboli told jurors he worked as many as 16 hours-a-day and twice slept under his desk as he struggled to make the $40 million profit necessary to cover the ETF desk’s costs.
Adoboli, who worked for UBS since leaving college, was accused of hiding the risk of his trades by booking fake hedges and storing profits in a secret account to cover the costs of running the bank’s exchange-traded-funds desk.