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Adoboli Sent Rogue Trader Warnings by UBS After Kerviel Losses

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Prosecutors have said Kweku Adoboli, who is on trial for fraud and false accounting dating back to October 2008, hid the risk of his trades by booking fake hedges while he worked at the exchange-traded funds desk. Photographer: Simon Dawson/Bloomberg
Prosecutors have said Kweku Adoboli, who is on trial for fraud and false accounting dating back to October 2008, hid the risk of his trades by booking fake hedges while he worked at the exchange-traded funds desk. Photographer: Simon Dawson/Bloomberg

Oct. 24 (Bloomberg) -- Kweku Adoboli, the former UBS AG trader who is accused of causing a $2.3 billion loss, and other bank staff were sent e-mails alerting them to the conduct of Jerome Kerviel at Societe Generale SA.

UBS sent two e-mails about Kerviel’s 4.9 billion-euro ($6.4 billion) trading loss at Societe Generale to all investment bank employees, prosecutors told jurors at Adoboli’s trial in London yesterday. The first one, after the French banker’s trades were uncovered in 2008, called Kerviel a “rogue trader” and warned UBS staff to be on alert for “unusually large trading volumes.”

Prosecutors have said Adoboli, who is on trial for fraud and false accounting dating back to October 2008, hid the risk of his trades by booking fake hedges while he worked at the exchange-traded funds desk. Kerviel was found guilty in 2010 of forgery and breach of trust and given a prison sentence and ordered to repay the full 4.9 billion-euro loss.

“Any suspected fraudulent activity or breach of trust should be escalated to your local compliance officer,” UBS’s internal compliance department said in an e-mail following Kerviel’s conviction, read to the jury by prosecutor Esther Schutzer-Weissmann. “UBS does not tolerate violations of its code.”

Compliance Alert

Adoboli, 32, has pleaded not guilty and his lawyers have sought to show the jury that others knew about his trading.

The first UBS e-mail, sent on Jan. 25, 2008, was titled “Global Compliance Alert: Rogue Trader Costs Societe Generale $7.1 Billion.” It compared Kerviel to Nick Leeson, the former British derivatives trader who caused the collapse of Barings Plc in 1995.

That e-mail, from the internal communications department at UBS’s investment bank, warned staff to be on the alert for “unusually large trading volumes” and other warning signs such as traders exceeding risk limits, transactions “that don’t seem to serve a purpose,” a pattern of late or canceled trades, or unusual amounts of profit or loss.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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