Today’s story takes place in the City of London, The Square Mile, still just about one of the world’s foremost financial hubs. I appreciate City Bankers are up there in popularity with lawyers, MP’s and traffic wardens, but hang in there – it is a fascinating story I promise.
Just by Liverpool Street stations, is UBS, a global company which provides financial services in over 50 countries, originating in Switzerland. Back-room staff began a normal working day in finance on a London summer day, but quickly spotted a glaring red flag – billions in incorrectly booked trades.
We’re going to have to do a quick side bar here to explain what an incorrectly booked trade is – so bear with me. There are a few ways a trade can be wrong for one of the stockbrokers in the bullpen of a London Stockbroker: the stock valuation could be wrong, or the information wrongly entered for the trading companies, or the date could be wrong. In this case it was the latter – and that matters because you can make a suggestion the market is moving in a certain direction. Say I go on Facebook marketplace, and I make an offer of 100K on an Ikea desk – then I double down and I offer that for a hundred Ikea desks – suddenly we’re all looking at our desks thinking “woah I’m sitting on a gold mine!”. That was the case for these trades – they were set far into the future, but showing up on the day’s trade made it look like they were real, so would send the market in a particular direction. But maybe it was a simple mistake?
An internal investigation by UBS was rapidly launched into the trades, which were soon noted to be the largest unauthorised trading losses in British history. The losses were noted to have cost the bank £1.3bn and had wiped £2.7bn from its share price. As the realisation of what had happened kicked in for some people this was their worst nightmares come true and then some.
UBS compliance staff member William Steward was asked to look into the financial irregularities. He did not consider that the trades could possibly be off book. William continued to inquire about all the traders and books, questioning team members, including one successful and respected member of the team – Kweku Adoboli. We have to remember here the roles played at the Bank – Kweku was a highly paid superstar Trader. William was not paid a fraction of the salary of Kweku and he was part of the back-office function seen as, well, we can kindly say that compliance although vital doesn’t have the same profile.
Kweku gave William a simple explanation for the mistakes in his books, blaming staff shortages for the wrongly booked in trades. William agreed that this was plausible, as a lack of staff meant that Kweku was under immense pressure. He admitted to William that he had cut corners to make up for lost time, thanks to the scarcity of assistance, he said “The main problem going through July and August is that (we’ve been) really, really fucking busy. We had an annoying client which was taking up half my day plus we had all these client meetings, and the market was going crazy, plus I was like a man or two down every day.”
William and Kweku at this point had three conversations about his questionable trades, but William understood, apologising for the lack of support Adoboli had been able to receive.
To finally put the issue to bed, William asked to look at Kweku’s figures.
But there was a big problem. Kweku was unable to provide the numbers. He had managed to convince his accountants, but there was no way that his figures could also reflect his lies, so he blustered. But William persisted and then three weeks later, after more pushing for the figures, Kweku sent William an unexpected, bombshell email. He admitted to William that his trades were “off-book”. He admitted that his trades were ‘fake’. He was hoping to make his losses back, but had, in his words, “clearly failed”. He added that he was: “deeply sorry to have left this mess for everyone and to have put … my colleagues at risk.”
In essence, this meant that the deals Kweku had been completing weren’t real at all. There were no customers. Nobody at all was on the other side of the deal.
He continued in his confessional email, “I have now left the office for the sake of discretion. I will need to come back in to discuss the positions and explain face to face, but for reasons that are obvious, I did not think it wise to stay on the desk this afternoon”. The banker had finally been pushed to tell the truth by his girlfriend, who had told him that he “can’t keep fighting this battle that you are clearly not winning”.
Following this email, he returned to the bank where he was taken to the seventh floor where for literally hours he explained to a variety of different managers just what he had done and how. They kept asking who else knew and he said nobody else just him.
The night went on and soon there were eight UBS lawyers in the room with him and they asked him if he wanted a Dominos pizza. He later explained in his own words to CNBC what happened next:
“By now I’m texting my girlfriend . . . it’s midnight, half midnight. She’s like, what’s happening? When are you coming home? I’ve made chicken, are you OK? Come home . . . Then at 12 I’m like, oh, they’ve just said I’m probably going to finish up in half an hour, I’ll be home by one. And then my phone battery died and then at one they came in, or half one, 20 past one, they came in and said, really sorry Kweku, we know we said you could go home but we’ve had to call the police and they’re coming to arrest you. I was like, OK. You’re just girding yourself, right.”
From there it was two nights in Bishopsgate Police station in the City before a trip to the Magistrates court and then Wandsworth prison – a bit of a difference being in a cell to his luxury Shoreditch flat.
Kweku didn’t deny what he had done – the belated audit trails would all show his actions when analysed properly. His basic argument was that the bank was aware of his actions and had turned a blind eye as he continued to produce the profits which led to the huge bonuses enjoyed by his bosses. His colleagues tended to deny knowledge of what he was doing.
So can any business survive a 2 BILLION dollar loss? Well in the weird world of finance. Maybe? But heads did roll. The CEO of UBS, resigned “to assume responsibility” for the recent unauthorized trading incident. And the co-heads of Global Equities at UBS, realised their positions were untenable and also resigned. It later emerged that UBS had failed to act on a warning issued by its computer system about Kweku’s trading. The computer system at UBS had detected the unauthorized trading activities of Kweku beforehand and had issued a warning, but the bank had failed to act on the warning.
No client funds had been reported loss following the scandal, but the reputation of UBS was had taken a major hit. Let’s face it, a huge fraud doesn’t suggest an organisation that is well managed. And there are other repercussions as his actions lead to job losses of the regular workers who had performed well and were totally unrelated to Kweku. For every high profile story of a so-called rogue trader, there are many stories of normal people losing their income. And here, the CFO of the bank would later tell how more than 500 jobs were lost and the bonus pool in its investment bank slashed by about 60 per cent, partly because of the loss. And 10 people lost their jobs directly because of his actions.
So how this situation unfold – let’s take a step back.
Kweku was born in Madina, a suburb of the Ghanian capital Accra in 1980. He was raised in his family home in Tema, Ghana with his three sisters and moved to the UK in 1991, and lived a privileged upbringing as the son of a UN official. By the age of eleven, Kweku had lived in Jerusalem and Syria for four years.
He boarded at Ackworth School in Leeds, which was a Quaker-run private boarding school, where he was a successful student and Head Boy between 1997 and 1998. The head teacher at the time, Martin Dickinson, described him as an “outstanding student”, who was “academically able, was a good sportsman and a natural leader who was widely respected by students and staff”.
In 2000, after Kweku had finished school, he began studying Chemical Engineering at the University of Nottingham, but switched to E-Commerce and Business Studies and was elected as the Communications Office for the University’s Student Union. In Mid-2002, he began his journey with UBS as a summer intern in the operations department, and became a campus representative for the bank, promoting the firm as a quality employer to other students, before his graduation in July 2003.
At the end of his studies, he joined UBS’ London Office as a Graduate Trainee in September 2003, in their Ascent Programme, designed for future leaders. He climbed his way up through the ranks at the office, working as a trading analyst in the bank’s back office, and then he got the dream move, when he was promoted to working on a Delta One trading desk.
Kweku rented a £1,000-a-week loft apartment in Shoreditch, a fashionable and now ridiculously expensive area of east London close to the UBS office. His former landlord Philip Octave described Adoboli as a “nice guy”, adding: “I don’t have a bad word to say about him”.
By 2010 he had become a Director at the firm, with a total package approaching £350,000 at this point as a member of UBS’ Global Synthetic Equities Trading team.
But from 2008, in the background of his climb up the career and financial ladder, he began dabbling in unauthorised activity. He started using the bank’s money for unauthorised trading, entering false information into the computers to hide the risky trades that he was making, using the skills he had learnt in his early days inside the back offices. In many cases he extended the time in which some trades would complete to buy him time to make up any losses, exceeding the bank’s per-employee daily trading limit of $100 million. He failed to hedge his trades against risk, which is a position intended to offset potential losses, in a ploy to maximise profits which exposed the bank to greater risk. SO, UBS thought it had exposure of $100m, because if one of his trades went wrong, the hedge was there to stem the losses. But with no hedge the losses were much higher and sometimes this worked well, but when it didn’t, Kweku would panic and double down to try to make things right. And so the debt spiralled very quickly.
At first his trades did well, making net profits of $40m in 2009 and 2010. But the summer of 2010, saw real turbulence in the market and it went wrong for him in a big way with huge losses, as high as £7.5bn at one time.
Additionally, he also used his personal cash on two spread betting accounts, IG Index and City Index, where the pay-off’s can be huge but the exposure is large and most people lose. He subsequently lost over £100,000.
Kweku also set up what he called his “umbrella”, which was a kind of internal slush fund in which to store skimmed profits that he and others could later sprinkle back in to cover daily losses. He was a popular guy and part of a close-knit trading quartet his defence dubbed “the four musketeers”. Despite the high-pressure nature of his work he had kept up the outward appearance of a “nice guy” to colleague he interacted with – and he was referred to as “the good cop of the ETF team” by a colleague.
A part of his job as a senior trader was mainly to rally the troops as they faced the inevitable ups and downs. He played this part well and known to play motivational recordings over the speakers on UBS’ London trading floor – nowadays, I imagine they all listen to the UK’s 37th most popular uk true crime podcast. And he was seen very much as the man who could make some of the issues faced by the team go away. One UBS colleague was quoted as saying that Kweku was the man they turned to when things went pear shaped and he usually managed to sort it, saying, “We didn’t know how he did it, but we didn’t want to know”.
But by the summer of 2011, the strain of his financial issues were beginning to show.
A junior trader on the desk noted during this time that he was “unfriendly, emphatic, unpleasant, distant (and) superior” and Kweku also split from his girlfriend, for two weeks but they got back together before his arrest. Despite the amount of money he was making in salary and bonus, his personal trading meant that his current account was more than £3,500 overdrawn and he had to use pay-day loan companies such as Moneybox and Wonga.
He even posted on his Facebook account that “I need a miracle”, shortly before suspicions arose about his activity. He had gone for a period of reflection to St Mary Moorfields Roman Catholic Church just next to the Broadgate Circle on September 14th 2011, before sending his confessional email to William Steward.
Following his arrest, Kweku, whose legal costs were funded through legal aid told police, “we were told you wouldn’t know where the limit of the boundary was until you got a slap on the back of the wrist,” he said. “We found the edge, we fell off and I got arrested.” He pleaded not guilty to two counts each of fraud and false accounting in January 2012 and released on conditional ,electronically tagged and placed under curfew at a friend’s house.
At his trial which took place at Southwark Crown Court, he had a legion of loyal supporters watching from the public gallery, including his girlfriend, Dad, sisters, friends and several co-workers. A former manager of UBS’ legal team, who had left the company in 2007, acted as an unpaid legal aid to his legal team. The prosecutor stated that he “was a gamble or two from destroying Switzerland’s largest bank for his own benefit.” She continued by claiming that his motivation was greed and further recognition in the competitive field. The prosecution called him an “accomplished liar” who “played God” with UBS’s money.
His defending QC said that Kweku was a “thoroughly decent, hard-working, loving, committed, driven and honest ex-trader”. And when giving evidence, he claimed in court he was “burnt out” and had “lost control” of his trades under pressure from his bosses to generate bigger profits by taking greater risks, saying that his actions were for the “benefit of the bank”
At the conclusion of the trial, the jury unanimously found him guilty on one count of fraud. Later that day, after receiving an instruction allowing for a majority decision, as a single vote was against, the jury found him guilty of a second count of fraud. They found him not guilty on the false-accounting charges. For these crimes, he was sentenced to seven years in prison. The judge told him that he was “arrogant enough to think that the bank’s rules for traders” didn’t apply to him.
Kweku stood silently as he was given his sentence, but acknowledged his friends and family with a small nod of the head, clenching his fist to his heart as he was led away to his cell.
The City of London Police said in a statement: “This was the UK’s biggest fraud, committed by one of the most sophisticated fraudsters the City of London Police has ever come across.”
In November 2012 the UK financial regulator fined UBS £29.7 million for system and control failings that allowed Kweku Adoboli to cause over $2 billion losses through his unauthorized trading. Kweku served out his sentence at HMP The Verne in Dorset, HMP Ford in West Sussex and HMP Maidstone in Kent, before he was released in June 2015.
Despite living in the United Kingdom since 1991, Kweku had never become a British citizen and was thus liable for automatic deportation under Section 32 of the UK Borders Act of 2007, as he was a foreign criminal who had been given a sentence of imprisonment for over twelve months. In July 2015, despite having lived in the UK since he was 11, Kweku he was served with his deportation proceedings and stayed with friends Pippa Scott and Roland Verhaaf in Edinburgh for three years. In July 2016, Kweku lost an appeal against the Home Office’s decision of deportation, but continued to appeal in an attempt to remain in the UK.
A funding page was set up by his friends and family in August 2018 titled KeepKweku, aiming to help continue their battle and to assist Kweku in his goal of remaining in the UK, which raised over £20,000. A petition was also created which gathered more than £74,000 signatures, including 130 by MPs. The law states that there must be ‘compelling reasons’ to override the result of deportation, including public interest, hence the desperate attempts by his loved ones to keep Kweku in the UK. But eventually, after seven long years of fighting the government from his initial arrest, he was denied permission for a judicial review and his deportation was scheduled for September 2018. Kweku was not even allowed to say goodbye to his loved ones in the UK, with his exit from the country carried out swiftly and brutally by the Home Office, as he was transported to Harmondsworth Immigration Centre then taken to Heathrow Airport…
“They did a bait and switch on the tarmac at Heathrow,” he said. “They indicated I would be boarding one plane then at the very last moment they forced me on to another so I couldn’t alert friends and family to what was happening”. He left the UK with just a small rucksack that he had packed to report at a Home Office centre in Glasgow, where he was arrested for his deportation.
He spent four hours of his flight from Heathrow airport sobbing about the life he had lost in the UK, and his cruel departure.
But back in his birth town of Accra, he received a warm welcome from his family and enthusiastic members of the community.
He was interviewed by The Guardian after living in Ghana again for two months, where he spoke highly of the nature of the residents – “In Ghana the concept of restorative justice exists, something that seems absent in the UK. People here are saying to me: ‘We need your skills, let’s get you back into the community. It’s not right or fair the way you were treated in the UK. Everyone makes mistakes and everyone deserves a chance to redeem themselves.’”
“This is not about not liking Ghana,” he said of his seven-year battle against deportation. “It is about what has been taken away from me in the UK.”
Kweku now lives with his Dad in the suburban neighbourhood of Tema, which is a thriving port city around 15 miles from the capital
Some have since questioned whether Kweku’s deportation was completely necessary. He had served his time in prison, had been released early and had been making clear efforts at to educate others away from the criminal behaviour which had turned his whole life upside down. However, the detrimental effect Kweku’s actions had on UBS cannot be understated, as he had significantly threatened the position of one of the world’s most powerful private banks – and everything that goes with that.
So what do you make of what we have heard today?
I suppose the first question I should ask is whether or not you have any sympathy with Kweku? Many won’t but I think I do. I think we can understand how in the world of trading where he knew that the livelihoods of so many people depended on his performance, the pressure was huge. And then once you go outside the rule book that one time you trust yourself to make any losses back, even if it means going outside the rule book. And then things escalate and before you know it you are looking at a hole. Really, after all the other trading and banking scandals over the years, surely this was a failure of management, control and regulation?
At court every day, the public galleries were filled with very nervous looking UBS executives. It would have been interesting to see the result if he had not been found guilty, as it would have suggested that the crimes committed were institutional. But as has always been the way for these large corporations, it is easy to describe men like Kweku as the bad guy among thousands doing the right thing. It is what we would expect right, but I was pleased to see at least three of the senior bosses do the right thing and resign.
And now, of course, UBS have assured us all that this could happen again at their well run bank. Ok, so let’s see. And as for Kweku, as he lives his life back in Ghana, I wonder how he reflects on his time and a top trader at one of the worlds most financially successful organisations.
This story was first covered as Episode 431 of the UK True Crime Podcast, and the following sources were used:
https://www.theguardian.com/business/2012/sep/18/ubs-trader-regulators-courthttps://en.wikipedia.org/wiki/2011_UBS_rogue_trader_scandalhttps://en.wikipedia.org/wiki/Kweku_Adobolihttps://www.bbc.co.uk/news/uk-19660659https://www.theguardian.com/business/2018/nov/26/deported-rogue-trader-kweku-adoboli-first-time-free-seven-years-home-office-ghanahttps://www.cfauk.org/professionalism/ethics/resources/lessons-learnt-kweku-adobolihttps://www.apra.gov.au/apra-explains-risk-weighted-assets#:~:text=Risk%2Dweighted%20assets%2C%20or%20RWA,is%20needed%20to%20protect%20depositors.https://www.investopedia.com/terms/c/cash_position.asp#:~:text=A%20cash%20position%20represents%20the,or%20a%20buffer%20against%20losses.https://www.fnlondon.com/articles/profile-ubs-kweku-adoboli-descent-of-delta-one-trader-20121121https://www.crowdjustice.com/case/keepkweku/https://www.cnbc.com/2015/10/22/kweku-adoboli-ubs-rogue-trader-on-profits-prison-release-with-ft.html