Kweku Adoboli trial: “Rogue trader thought he had magic touch”

12:41 14 September 2012

The court has been hearing from the prosecution in the trial of trader Kweku Adoboli. File photo: PA/PA Wire

The court has been hearing from the prosecution in the trial of trader Kweku Adoboli. File photo: PA/PA Wire

A “rogue trader” who thought he had “the magic touch” caused a Swiss bank losses of £1.4billion and was at risk of causing a hole of nearly £7.4 billion, a court heard today.

Kweku Adoboli is accused of gambling away the money by carrying out high-risk trades in a bid to boost his bonus, job prospects and status within the bank.

He worked as a trader for UBS and thought he had “the magic touch” but in fact caused “chaos and disaster”, Southwark Crown Court heard.

The 32-year-old is accused of two counts of fraud and two counts of false accounting while working for the bank. The charges relate to the period between October 2008 and last September.

Prosecuting, Sasha Wass QC said: “He is on trial because he lost his bank 2.3 billion US dollars (£1.4b). He fraudulently gambled it away. He also in doing so wiped around 10 per cent or about 4.5 billion US dollars (£2.8b) off the bank’s share price.

“He did all of this by exceeding his trading limits, by inventing fictitious deals to conceal this and then he lied to his bosses.

“Mr Adoboli’s motive for this behaviour was to increase his bonus, his status within the bank, his job prospects and of course his ego.

“Like most gamblers, he believed he had the magic touch. Like most gamblers, when he lost, he caused chaos and disaster to himself and all of those around him.”

Adoboli, of Clark Street, Whitechapel, worked for UBS’s global synthetic equities division, buying and selling exchange traded funds (ETFs), which track different types of stocks, bonds or commodities such as metals.

The bank set a daily trading limit for the ETF desk of 100 billion US dollars (£61.5b), and also used hedging to reduce risk - for example buying one type of investment and simultaneously selling a similar one to mitigate any loss.

Prosecutors claim Adoboli failed to hedge several of his investments in order to make a bigger profit for the bank and larger bonus for himself.

Ms Wass said: “At one stage Mr Adoboli was in danger of losing the bank nearly 12 billion US dollars (£7.4b) of unhedged investments.”

Adoboli is accused of losing the money in Britain’s biggest alleged banking fraud. Wearing a grey suit with a white shirt and purple tie, he was given permission to sit outside the dock with his legal team.

UBS discovered in September last year that Adoboli’s deals had caused the bank a loss of 2.3 billion US dollars (£1.4b), the court heard.

Ms Wass said: “To put the huge trading loss in some sort of perspective, 2.3 billion US dollars is enough to pay a year’s salary for nearly 70,000 new nurses or two Wembley stadiums or perhaps even six new hospitals.

“This colossal loss arose purely as a result of Mr Adoboli’s fraudulent deal making, which amounted as you will see, to nothing more than gambling.”

She told the jury that Adoboli had “fraudulently side-stepped” the bank’s rules that banned high risk and unauthorised investments.

“He was lying to the bank, both to his senior managers, his risk control department and the accounts department,” said Ms Wass.

“In effect he was risking the very existence of the bank by gambling its resources, ultimately for his own benefit.

“Mr Adoboli had ceased to act as a professional investment banker and had begun to approach his work as a naked gambler. He had become what is sometimes referred to as a rogue trader.”

But he had gone beyond the behaviour of a “mere rogue trader”, faking records over a two-and-a-half-year period, she said.

Adoboli made false entries to make it look as if the money he was gambling had been balanced by cash coming in, it is claimed.

The public school-educated former head boy got a job at the bank in 2003 as a graduate trainee and worked his way up. He became a trader in December 2005, was promoted to associate director in March 2008 and then director in March 2010.

Moving into trading meant he had the chance to earn million-pound bonuses, Ms Wass said.

She told the jury there was a “fundamental difference” between a gambler and an investment banker - with a trader taking “extreme care” to reduce risk.

Ms Wass said: “When you put your life savings in a pension fund you do not expect an investment banker to gamble it on the toss of a coin. You expect him to limit the downside and maximise the growth of the investment for your old age.”

Adoboli fell into a “gambling mindset” and very quickly the losses he was causing grew into billions, the court heard.

On September 14 last year, Adoboli was approaching a cut-off date for settlement of his trades.

Ms Wass said: “You will see, in the early days, Mr Adoboli’s dishonest practices had a measure of success. He was cheating the system, and he appeared to be getting away with it.

“On September 14 of last year, his system crashed like a car hitting a wall at high speed.

“He was left with no choice but to admit exactly what he had been up to.”

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