UBS banker sued in £1.4 billion rogue trade loss

UBS bank in Basel (AFP Photo/Sebastien Bozon)
A British Court has started the trial of Kweku Adoboli, a former UBS trader accused of making a trade that lost the firm £1.4billion.

Adoboli was probably thinking "greed is good" when he ran the risky trading strategy. His method of betting against the trend exposed UBS to a potential loss of £7 billion. The trader was caught in September 2011 after gambling with great sums for more than two years in an attempt to conceal his previous losses.

The motivation behind Adoboli's behavior was to increase his annual bonus and get himself into the Club of City trading gurus. Eventually, UBS suffered the £1.4billion loss thanks to Adoboli’s bets.

Adoboli, a Nottingham University alumni, started his career with UBS in 2003. A few years of back office experience gave him exposure to the strengths and weaknesses of the bank's accounting controls. That knowledge proved useful later, when Adoboli became head of the exchange-traded funds desk. His salary grew by leaps and bounds – from £33,000 in 2003 to £360,000 by 2010.

The compensation package depended on his performance. In 2008, Adoboli lost $400,000 and concealed it by booking a false trade against the loss. That was the beginning of his rogue trading. His consequent performance with the firm was fraudulently improved by exceeding the daily trading limit per employee, ignoring hedge trades and misrepresenting trading records.

Adoboli pleads not guilty, denying the charges of fraud and false accounting. The case, which is still going on, has already had a knock-on effect as the UBS management was reshuffled and 2011's bonuses reduced.