Adoboli Was in Debt, Had Spread-Bet Accounts: Prosecutor

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Former UBS Trader Kweku Adoboli
Former UBS trader Kweku Adoboli is charged with falsifying records on exchange-traded fund transactions and other documents needed for accounting purposes as early as October 2008. Photographer: Simon Dawson/Bloomberg

Kweku Adoboli, the former trader on trial for allegedly costing UBS AG $2.3 billion from unauthorized trades, was in debt and had several spread-betting accounts in violation of the bank’s rules, a prosecutor said.

The bank’s compliance department notified Adoboli, 32, that he should have flagged his personal trading through the spread-betting firms IG Index Plc and City Index Ltd. to UBS beforehand, prosecutor Esther Schutzer-Weissmann said at his trial in London today.

Adoboli’s personal bank accounts were mostly overdrawn and he had borrowed money from various short-term lenders, she said. At UBS, his pay rose from 40,500 pounds ($65,900) in 2005 to 360,000 pounds in 2010, including bonus, another prosecutor said at the opening day of his trial last week. He lost 123,000 pounds through his personal trading with IG Index in the year leading up to his arrest, Schutzer-Weissmann said today. Adoboli’s lawyers agreed not to challenge the information provided by the prosecutor.

By October 2010, Adoboli’s monthly salary payments into his primary checking account were 6,179.69 pounds. Turnover on the account in the 12 months leading up to September last year was 233,000 pounds. On the day he was arrested on Sept. 15 last year, the account was overdrawn by 3,594.70 pounds, according to the agreed facts. He had borrowed from at least eight short-term lenders.

Falsifying Records

The former trader is charged with falsifying records on exchange-traded fund transactions and other documents needed for accounting purposes as early as October 2008. Prosecutors also charged him with fraud for abusing his senior trader position. His trial, at a London criminal court, is scheduled to last eight weeks.

Lawyers at the firm Bark & Co. said in a statement on their website that Adoboli “is keen to proceed with the evidence and ensure that his own account is put forward,” which will give the jury a chance “to consider a radically different and compelling version of both his trading and the way he was managed.”

Adoboli was arrested by the City of London Police last year after he confessed in an e-mail to a UBS accountant to accruing losses during “the aggressive sell-off in the days of July and early August” as a result of the “escalation of the euro-zone crisis,” prosecutors said at the trial last week.

German Futures

The former trader apologized and admitted he’d risked $5 billion on Standard and Poor’s 500 futures and a further $3.75 billion in the German futures market, another prosecutor, Sasha Wass, said in her opening arguments.

Three of Adoboli’s four personal bank accounts were overdrawn at the time of his arrest. The fourth had less than 4 pounds in it, Schutzer-Weissmann said.

UBS’s compliance team sent him a violation notice for failing to disclose his IG Index account in April 2011, just over a year after he had opened it. He opened the City Index account in March that year, which he also didn’t disclose to UBS. The bank changed its policy in May 2011 to prohibit spread-betting on financial instruments.

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 UBS attributes to him came from trading in Standard & Poor’s 500, DAX and EuroStoxx index futures.

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.

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