UBS Unaware That Rogue Trader Had Lost $2 Billion Until He Blew The Whistle On HIMSELF – UBS Shares Plummet 10%

Oh, sure!

More BS we can believe in!

In other news:

Alleged rogue trader costs UBS $2bn (Guardian):

A 31 year old man has been arrested by City of London Police on suspicion of fraud in connection with the alleged rogue trading incident that has cost Swiss bank UBS around $2bn (£1.3bn).

The Zurich-based bank uncovered the incident as recently as the last 24 hours and suffered a near 10% fall in share price in early trading after it revealed the loss could push the bank into the red for the current financial quarter.

Bank unaware that ‘rogue trader’ had lost £1.3bn until he blew the whistle on HIMSELF (Daily Mail, Sep. 15, 2011):

  • UBS were only alerted to the staggering losses when Kweku Adoboli ‘confessed about the dealings’
  • Privately educated Adoboli was a ‘work-hard play-hard’ trader who entertained a string of attractive women at his luxury flat in East London
  • Shares in Swiss bank UBS slump 10% following the scandal
  • Adoboli’s boss ‘quits’ as questions surface over his supervision of staff
  • Credit ratings agency Moody’s said it will review UBS’s rating

The trader arrested on suspicion of a staggering £1.3billion fraud at UBS is believed to have blown the whistle on himself about the unauthorised deals.UBS’s internal controls were unaware of the the huge losses allegedly generated by ‘rogue trader’ Kweku Adoboli, 31, who allegedly confessed to bosses about the huge losses.

UBS are then believed to examined his trading positions and called City regulator the Financial Services Authority (FSA) and the police, according to the BBC.

After his arrest at his desk in the early hours of Thursday, Adobli has hired City experts Kingsley Napley, the law firm which advised Nick Leeson, the man who brought down Baring’s Bank in the 1990s, according to Sky News.

The revelations is set to add to fears about the risks taken by investment banks and heighten calls for greater regulation in the banking industry.Adobli’s last Facebook message, which was believed to have been left on Tuesday, September 6, read: ‘Need a miracle.’

He is then believed to have confessed to his bosses at Swiss banking giant UBS the extent of the losses he had racked up, as it is understood the bank were not aware of the suspected fraud.

The Ghanaian, who was privately educated in Britain and is the son of a retired UN worker, is accused of being responsible for the biggest loss ever accrued by a single trader based in London.

The £1.3billion figure easily dwarfs the £827million lost by rogue trader Nick Leeson, who served more than three years in a Singapore prison for forging documents and deceiving the bank’s auditors.

It equates to about the same amount UBS is seeking to save by cutting 3,500 jobs worldwide.

Speculation was mounting that he may have been caught out after the Swiss Central Bank unexpectedly devalued the franc last week, producing mammoth losses on one of his currency trades.

Oswald Gruebel, UBS chief executive, has called the loss ‘distressing’ and said he ‘will spare no effort to establish how it happened’.

Adoboli’s boss John Hughes is reported to have quit his job in the aftermath of the scandal. Sources said he would have faced serious questions about supervision of staff. He could not be reached for comment last night.

Following the incident, credit ratings agency Moody’s said it would place UBS’s rating under review focusing on ‘ongoing weakness’ in the Swiss bank’s risk management.

UBS, which has three keys in its logo symbolising ‘confidence, security and discretion’, has said no client funds were affected by the incident.

City of London Police commander Ian Dyson said the force was tipped off by UBS at 1am on Thursday morning.

Within three hours, detectives had entered the HQ of UBS and had also arrested Adoboli, who according to sources was a ‘work-hard, play-hard’ trader who enjoyed the company of a series of attractive women at his flat in Whitechapel, East London.

Sources said Adoboli, who is listed as director of Exchange Traded Funds (ETF) and Delta-1 Trading on his LinkedIn profile, a social networking site for professionals, earned around £200,000 a year, plus up to £400,000 more in bonuses.Adoboli was formally arrested on suspicion of fraud by abuse of position, and was still in custody last night. Police are liaising closely with the Crown Prosecution Service and a decision on charges could be made over the weekend.

He was detained on the third anniversary of the collapse of U.S. investment bank Lehman Brothers, and just three days after an independent report called for tighter regulation of British banks, to stop potentially catastrophic ‘casino’ banking.

His arrest stunned the City and there were calls last night for recommendations made by the Independent Banking Commission, chaired by Sir John Vickers, to be implemented more quickly

Lord Oakeshott, a leading Lib Dem peer and a professional investment manager, said: ‘This reminds us how much toxic banking risk remains in the system, and how urgent radical reform is. The problem is that big investment banks are full of rogue traders: It is what they do.’

Rogue traders act independently of colleagues (often recklessly), harming both clients and the firm they work for. In most cases this type of trading is high risk and can create enormous losses.

As police questioned Adoboli, it was unclear how he was allegedly able to lose such eye-watering sums without being detected by UBS’s risk management team.

Sources said he would have had to exercise ‘considerable criminal energy’ to conceal his ‘unauthorised’ dealings.

Instead of confessing immediately, he might have concealed the catastrophe from his bosses and doubled his bets in an attempt to re-coup the losses.

Sources confirmed that inquiries are focusing on the Delta One trading desk that Adoboli worked on.

It is believed the team took bets on tiny movements in equity trades using a complex mathematical formula.

The type of trade is the same as the one used by Jérôme Kerviel, the rogue trader who amassed losses of 4.9billion euros at Société Générale in 2008.

In a brief statement UBS said that no client positions had been affected. But the company, which has 6,000 staff in the UK, saw its shares slide 10 per cent.

Adoboli joined UBS in 2006 as a trainee investment adviser. He took on a more senior role as a trade support analyst in 2007 before assuming his present role in one of the banking world’s most esoteric trading areas.

He is listed as director of Exchange Traded Funds (ETF) and Delta-1 Trading at UBS Investment Bank in his profile on LinkedIn, the social networking site for professionals.

ETFs are an investment fund traded on stock exchanges, much like stocks, which holds assets such as stocks, commodities, or bonds.

Last night, speaking at his home in Ghana, Adoboli’s father John, a retired UN worker, told the Daily Mail: ‘It’s an unfortunate situation and we’re worried because we’re a decent and hardworking family, and so is Kweku.

‘My utmost desire at this time is to get an opportunity to speak with him. I’d like to find out from him what happened and how he found himself in this situation.’

Oswald Grübel, the UBS chief executive, said that he would ‘spare no effort to establish how it happened’.

In a memo to staff, the German-born banking boss said: ‘The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars. It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.

‘We understand that you have already had to contend with unfavourable, volatile markets for some time now.’

He added: ‘We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened.’

Champagne, girls and an obsession for making money

Kweku Adoboli has always believed life is about winning and losing. He certainly knew how to win. At his desk in the City of London, at home and into the early hours, he dreamed up every conceivable way of making money.

They ranged from scouring the internet to make a few quick pounds buying and selling some online bargain, to pulling off a spectacular deal that would net him and his superiors at UBS profits they could count in millions.

But long before detectives arrived to arrest him at 3.30am yesterday, he had also discovered what it felt like to lose – in his case a staggering £1.3billion.

A highly educated young man from a respectable background in Ghana, in some respects Adoboli lived the free-wheeling lifestyle of the archetypal City trader.

He mixed champagne with takeaway pizzas, and his parties were notoriously riotous. But he also frequently worked through the night, doing what his bosses paid him to do – take risks.

According to colleagues, Adoboli – the ex-public schoolboy son of a retired senior United Nations executive – was more than a flash trader motivated purely by conspicuous consumption. They said it was making the money that drove him, not spending it.

He worked under extreme pressure, making instant decisions with fortunes at stake and taking bets on tiny movements in equity trades. He also gambled on which way currency would move, studying trends and collating information through the night and predicting what would happen when the markets reopened. What appears to have happened is that the Swiss Franc moved quicker than he did, and downwards.

Born in the thriving Ghanaian coastal city of Tema to affluent parents, his talent for solving mathematical puzzles was clear from an early age.

His father – a much respected UN official who has since retired – decided to send his talented son, along with his other children to boarding schools in the UK.

Adoboli adapted well to live in one of the boarding houses at Ackworth School, a fee-paying school in Pontefract, West Yorkshire, set up by Quakers in 1779.

Indeed, he was so well regarded by teachers that he was eventually made head boy. In a profile on the school website a teenage Adoboli wrote of his obsession with ‘sport, music, good reading and material things, (and girls as well).’

He also set out his ambition to be an athlete, writing: ‘If life is all about winning and losing then how can sport not be about winning and losing.’

After school, Adoboli toyed with becoming a chemical engineer before accepting an offer from the University of Nottingham to study a degree in E-commerce and digital business.

While at university he helped plan drunken nights out for new students, which he described as ‘an amazing opportunity for hundreds of students to meet at a jamboree of parties’.

After graduating in the summer of 2003, he lived in Nottingham for a while before moving to London where he relished the high life of the capital.

It was in March of 2006 that he joined UBS as a trainee.

In London, Adoboli threw himself into his work. He spent hours at his computer looking for minor investments and bargains, often Tweeting his triumphs so others could cash in on his research. ‘Check out this article!’ said one Tweet, giving an internet link. ‘I made $360 today!’

He also slipped easily into the cultural and social life of his adopted home in London’s East End. He was a familiar figure at the trendy Boundary complex of restaurants and bars in Shoreditch – yet also a big fan of KFC and Pizza Hut takeaways.
According to former landlord Philip Octave, he was a good tenant. He paid £1,000 a week for a ground floor and basement flat in a former Jewish soup kitchen in Spitalfields, less than a mile from his office.

Mr Octave said: ‘He’s a very nice guy, very polite, he would speak to anyone. No one had a bad word to say about him.’

However, a neighbour said Adoboli had regular and noisy parties towards the end of his time there. ‘I would sometimes scream out in the middle of the night to tell him to turn it down,’ he said. ‘He would get DJs for his parties to play house music – they were really extravagant affairs. There would be 50 to 100 people with some even spilling out on to the street.’

Four months ago Adoboli moved to a gated modern development in nearby Whitechapel.

Neighbour William Pitt, 39, an Australian banker, said he worked nights, ate fast food and had a string of glamorous female visitors.

‘He was always tired,’ he said. ‘He was coming in when I was going out. He was obviously doing the night shift. He always had plenty of women around his apartment. They were all beauties.

‘Recently we were talking about the markets and I asked if he was getting a pasting. He replied, “It’s a s*** fight”.’

A few weeks ago Adoboli lent Mr Pitt a copy of The Wolf Of Wall Street, by Jordan Belfort. It tells the story of a young trader who makes piles of money … loses it … and ends up on the wrong side of the law.

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