Ex-UBS Trader Takes Stand for First Time at Fraud Trial
By Lindsay Fortado and Ben Moshinsky – Oct 26, 2012 9:24 AM ET
Kweku Adoboli tearfully told jurors at his fraud trial that he neglected family and friends, working as many as 16 hours-a-day and twice sleeping under his desk, while on UBS AG (UBSN)’s exchange-traded funds desk.
Joining the bank fresh from university, Adoboli said his colleagues at UBS and the trading desk replaced his own family. He said he struggled to make the $40 million profit necessary to cover the desk’s costs, and hid a $6 million gain in 2009 so he could release it later.
“Your life becomes work,” Adoboli said. “Everything is defined by the struggles of trying to make this thing work. Every minute of every day was spent trying to figure out how to make this book work.”
Former UBS Trader Kweku Adoboli told jurors “At an early age I learned to take responsibility.” Photographer: Simon Dawson/Bloomberg
Adoboli, now 32, is accused of booking fake hedges to hide the risk of trades, causing the Swiss bank a $2.3 billion trading loss — the largest unauthorized trading loss in U.K. history. He was charged in September of last year with two counts each of fraud and false accounting. Today prosecutors added two more false accounting charges covering claims Adoboli created an account where he parked trading profits to cover future losses on the ETF desk. He has pleaded not guilty.
When Adoboli joined the desk in 2006 there were two other traders. One, Mike Foster, left in the summer of 2007 leaving John Hughes in charge, Adoboli said. At the time, Adoboli was 27 and Hughes was 24.
In 2007, with the financial crisis and the departure of Foster from the ETF desk, Adoboli said the job began consuming his life. He was unable to leave work when his grandmother died because it was only he and Hughes handling the desk, he said.
“After Mike left, I ended up taking responsibility for managing the client book” because Hughes didn’t want to, he said. “There was a total of 30 months in trading between the two of us, and we were in charge of a $50 billion book.”
With only Adoboli and Hughes on the team, long hours were required, he told the jury. He said he would wake up at 4 a.m. to start checking messages and Bloomberg news before cycling to work for 6 a.m. He sometimes didn’t leave until 10 p.m. or even early morning, he said, and after he left for the day would monitor CNBC for news on the U.S. markets.
“There was no room for anything else, because we just didn’t have the resources to take a step back,” he said. “To make it worse, we were just losing so much money, it was mental, and there was no way of avoiding these costs.”
“They didn’t speak to us about it, they just let us get on with it,” Adoboli said of UBS management. “We ran the desk on our own.”
The former trader, who broke down crying soon after he began testifying today, said it was unfair for prosecutors to claim his back-office experience before joining the ETF group led him to book fictitious trades.
“It is unfair to say that it is because of that set of skills” that I committed fraud, Adoboli said. “Roughly half the people on the trading floor” had a similar background.
Ruwan Weerasekera, chief operating officer of securities at UBS’s investment bank, testified Oct. 9 that Adoboli booked tens of thousands of real and fake trades during the summer of 2011 that exposed UBS to losses that may have escalated to as much as $12 billion while on the ETF trading desk.
Adoboli told jurors about his childhood in Ghana and living in moving around the world, including to Israel and Syria, as the son of a United Nations official. He wept when his lawyer Paul Garlick pointed out his father had attended every day of his trial.
“At an early age I learned to take responsibility” with his father often away on work assignments, Adoboli said. “I was often told — make sure you look after your mother and your sister.”
Adoboli was sent to boarding school in England when he was 12. After that, he attended Nottingham University, got a summer internship at UBS in 2002 and joined the bank after graduating in 2003. The only other job he ever had was as a waiter.
He started at the bank working for the trade-settlements team and was offered a role in prime brokerage as a junior trader in 2005. It was “incredibly hard work” and rewarding, he said, and the bank continued to offer him new opportunities.
“In 2003, it felt like UBS was a family, it was an organization that was very bold, that was trying to grow, that was acquiring businesses all over the world, an organization that many of us were incredibly proud to work for,” Adoboli said. “Without asking for more opportunity, I was given more opportunities.”
In the U.K., fraud charges carry a maximum sentence of 10 years in jail, and seven years for false accounting.
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