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Ex-UBS Trader’s $2.3 Billion Trading-Loss Trial to Begin

Ex-UBS Trader Adoboli’s $2.3 Billion Trading-Loss Trial to Begin
Kweku Adoboli is charged with falsifying records on exchange-traded fund transactions and other documents needed for accounting purposes as early as October 2008, according to his indictment. Photographer: Simon Dawson/Bloomberg

Kweku Adoboli, accused of unauthorized trades that cost UBS AG $2.3 billion, will go on trial next week charged with fraud and false accounting in one of the highest-profile banking cases ever heard in London.

Since being released on bail three months ago, Adoboli, 32, has worked on his defense at the office of his law firm, Bark & Co. He is facing an eight-week trial in criminal court to decide whether he caused the largest unauthorized trading loss in British history at UBS’s investment bank a year ago.

He is charged with falsifying records on exchange-traded fund transactions and other documents needed for accounting purposes as early as October 2008, according to his indictment. Prosecutors also charged him with fraud for abusing his senior trader position “by causing or exposing UBS Bank to losses intending thereby to make a gain for himself.”

The trial comes on the heels of a series of scandals for London’s finance industry. Barclays Plc, the country’s second-largest lender by assets, settled with regulators in June for a record 290 million pounds ($461 million) for rigging interest rates. Standard Chartered Plc paid $340 million last month to settle allegations by New York’s banking regulator that it laundered $250 billion for Iran and HSBC Holdings Plc is also being probed over handling cash for sanctioned nations.

In the U.K., fraud charges carry a maximum sentence of 10 years in jail, and seven years for false accounting. Adoboli is facing two counts of each.

Delta One

Tim Harris, Adoboli’s lawyer, said he was unable to comment on the case before trial, which is scheduled to start Sept. 10.

“The U.K. criminal process is ongoing and will run its course,” UBS spokesman Richard Morton said in an e-mailed statement. “UBS is not a party to the case and therefore has no further comment.”

Adoboli worked for the Zurich-based investment bank’s Delta One desk, which handles trades for clients -- or risks the bank’s own money -- typically by speculating on a basket of securities. The loss, which came from trading in Standard & Poor’s 500, DAX and EuroStoxx index futures, didn’t affect any client positions, according to UBS.

Held in Wandsworth prison in southwest London after his arrest on Sept. 15, Adoboli was granted bail and released June 13. He is staying with a friend in the British capital, Harris has said. As part of his bail conditions, he has a curfew and has surrendered his Ghanaian passport.

Internal Controls

In May, UBS said it had fixed weaknesses found in its internal controls in the aftermath of the unauthorized trades, without referring to Adoboli. Ten people have left UBS after the discovery of the unauthorized trades, according to the bank. Oswald Gruebel, the former chief executive officer at the bank, also left last year after the loss.

In a memo this week, Gruebel’s successor Sergio Ermotti said the bank has been “embarrassed by this episode” and reminded UBS staff that misconduct is “unacceptable.”

“Amidst all the progress that we have made since this incident, we must never forget that our reputation is more important than anything else,” Ermotti said.

Adoboli was born in Ghana to a former United Nations official and attended a Quaker boarding school in West Yorkshire, England, until 1998. He graduated with honors from the University of Nottingham in July 2003 with a degree in e-commerce and digital business. Photography, cycling and wine are among his interests, according to his LinkedIn profile.

Prior to his arrest, Adoboli lived in a luxury apartment in east London, a five-minute walk from UBS’s London offices. His lawyers have disclosed in court hearings that he is now in debt and needs government assistance to pay his legal bills.

Judge Brian Keith ordered UBS and City of London Police in June to provide evidence to defense lawyers and prosecutors, including results from searches of Adoboli’s computer and mobile phones, records of personal trading done through London-based spread-betting firm IG Index Plc, and details of disciplinary hearings with three of his co-workers on the Delta One desk.

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