Kweku Adoboli was born in Tema, Ghana, in 1980, the son of a United Nations diplomat. After spending time in various countries, he moved to the UK with his family in 1991. He studied at Ackworth School in Yorkshire, then did a degree in e-commerce and digital business studies at the University of Nottingham, graduating in 2003. He then got a job at investment bank UBS, starting in an administrative back-office job before moving to a senior role on the bank’s trading team on the desk dealing with exchange-traded funds.
What was the scam?
As well as executing client orders, Adoboli’s team was also allowed to risk the bank’s own money on positions. However, Adoboli began making bets that far exceeded his risk limits, exploiting holes in the system to cover up the amount of risk he was taking, as well as the money that he was losing. He booked fictitious trades in the opposite direction to the positions that he was taking, giving the false impression that he was hedged (that is, that the fictitious trades would offset any profits or losses on his real trades).
What happened next?
Initially, Adoboli’s trades worked, making net profits of $40m in 2009 and 2010. However, in the market turbulence of the summer of 2010, he sustained huge losses that at one point stood at £7.5bn. Although he managed to claw back some of the money, it became clear that the remaining losses would be too large to hide. Facing an investigation from the bank, he confessed what he had done in September 2011 and was arrested. He had racked up the largest unauthorised trading losses in British history. Despite arguing that UBS was aware of his acitivities, Adoboli was convicted of fraud and sentenced to seven years in jail.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Lessons for investors
Adoboli’s losses ran to about £1.4bn, and news of the fraud wiped £2.7bn off UBS’s market capitalisation. Its share price still hasn’t fully recovered, suggesting that fraud can sometimes be a symptom of poor underlying management. Adoboli claimed that most of his losses stemmed from being talked into reversing a short position prematurely by the rest of his team, but he also lost large sums of money through his personal spread-betting activities and, despite a six-figure salary, was dependent on payday loans. Making large risky bets while running up debt is rarely a good idea. Doing it with your firm’s money without its knowledge, even less so.
-
MoneyWeek celebrates 25 yearsMoneyWeek is 25 and continues to help readers make, keep and spend money every week
-
Pensions IHT reform: major changes needed says former ministerExperts are calling on the government to make the system for applying inheritance to pensions ‘more effective, efficient and humane’
-
The Stella Show is still on the road – can Stella Li keep it that way?Stella Li is the globe-trotting ambassador for Chinese electric-car company BYD, which has grown into a world leader. Can she keep the motor running?
-
Investing in UK universities: how to spin research into profitsUK universities are a vital economic asset, but they are also Britain's 'equivalent of Gulf oil.' There are opportunities here for investors
-
Lessons from Nobel Prize winners in economics on how to nurture a culture of growthThe Nobel Prize in economics went to three thinkers who show us why economies grow and how we can help them do so. Governments would be wise to heed the lessons
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Albert Einstein's first violin sells for £860,000 at auctionAlbert Einstein left his first violin behind as he escaped Nazi Germany. Last week, it became the most expensive instrument not owned by a concert violinist
-
Who is Rob Granieri, the mysterious billionaire leader of Jane Street?Profits at Jane Street have exploded, throwing billionaire Rob Granieri into the limelight. But it’s not just the firm’s success that is prompting scrutiny
-
David Ellison: America's new media mogulDavid Ellison is building a mighty new force in old and new media. Critics worry that he will prove to be a Trumpian patsy. Is that fair?
-
Alok Sama on AI and how to invest in the future of technologyInterview Alok Sama, the former president and chief financial officer of Masayoshi Son’s investment vehicle SoftBank Group International, explains AI’s potential
