The Trader Who Shattered UBS Now Faces His Own Reckoning

(Bloomberg) -- Seven years ago this week, a cryptic post appeared on UBS Group AG trader Kweku Adoboli’s Facebook page: “Need a miracle.” He was on his way to racking up a $2 billion shortfall that would become the biggest unauthorized trading loss in British history.

Today, the 38-year-old is grasping for a miracle of another kind. He was detained Monday as a prelude to being deported to his native Ghana under U.K. rules governing crimes by foreigners. He hasn’t lived there since childhood. 

For his trading violations, Adoboli served about half of a seven-year sentence, getting out in 2015. His case reverberated through the bank and London’s City financial center, taking down UBS’s chief executive officer, sparking a sweeping overhaul of bank strategy that echoed across the industry and reminding the world that bankers’ behavior hadn’t necessarily improved since the 2008 crash.

The Trader Who Shattered UBS Now Faces His Own Reckoning

“Adoboli’s case was a seminal moment in the City and a wake-up call that culture and conduct in banks hadn’t changed as much as it should have post-crisis,” said Matthew Frankland, a criminal-defense lawyer at Byrne and Partners. “The prosecution was the first of many that laid bare banker excess and the problems of junior traders having too much power.”

A spokesman for the bank declined to comment.

Adoboli’s actions hastened a review that led to 10,000 jobs being eliminated, and the dismantling of portions of an investment bank that UBS spent more than a decade building. In the immediate aftermath of his arrest, the bank—fined 29.7 million pounds ($38.3 million) in 2012 for failing to detect or prevent the trades—increased monitoring of staff, provided training for supervisors and brought in extra checks for employees moving from the back office to trading roles, as Adoboli had.

“This de-risking of the whole investment bank is something they were trying to do anyway,” said Florian Esterer, a portfolio manager in Zurich with Bank J. Safra Sarasin AG, which oversees about 170 billion Swiss francs ($175 billion). “But this sharpened minds both externally and internally that this was the path they needed to go down.”

Organizational changes might not be enough to prevent a repeat of Adoboli’s case, Esterer said. “These are questions of culture. If you have the same people, even if you give them better systems, their default behavior will not change.”

Adoboli worked for UBS’s investment bank on its Delta One desk. Traders there typically helped clients speculate on, or hedge the performance of, a basket of securities. The group also traded using the bank’s own money.

Things started to fall apart in July and August 2011, when a market selloff caused trades to lose money. By Aug. 8, Adoboli ’s potential losses hit $12 billion, the jury heard at his trial. On Sept. 14, eight days after his desperate Facebook post, he left the bank at 1:30 p.m., prosecutors said. He then emailed UBS accountant William Steward, who had been asking about Adoboli’s trading, from his home account with the subject line: “An explanation of my trades.”

In that email he admitted to making “off-book trades” and said he took responsibility for “the s**t storm that will now ensue.” He was called back to the office to explain his actions to managers. Early the next morning, he was arrested.

The Trader Who Shattered UBS Now Faces His Own Reckoning

Sitting in the cafe of London’s Tate Modern art gallery last month, overlooking St. Paul’s Cathedral across the Thames, Adoboli veered from calmness to anger and from laughter to tears as he reflected on the past decade.

Since his release from prison, he’s lived with a friend’s family outside Edinburgh. He’s sought to establish himself as an advocate of cultural change in what he describes as the “super-aggressive, high-competition environment” of investment banking.

He accepts his actions were criminal “because a massive loss was made and my jury decided, and there was dishonesty involved.” But he finds it “very difficult” when people call what he did a crime.

“If your leaders are driving you to do it, and they’re aware that the risk you’re taking is different to what you’re disclosing,” then “it’s a struggle,” he said, adding that being called a rogue trader “drives me nuts.”

That’s how London judge Brian Keith described Adoboli  while imposing his sentence in November 2012. “The fact is that you are profoundly unselfconscious of your own failings,” the judge said. “You denied that you were a rogue trader, claiming that at all times you were acting in the bank’s interests, while conveniently ignoring that the real characteristic of the rogue trader is that he ignores the rules designed to manage risk.”

Adoboli isn’t the only one to suffer the consequences of his misdeeds. UBS CEO Oswald Gruebel, a titan of European finance who had previously led UBS’s local rival in Zurich, Credit Suisse Group AG, resigned “to save the reputation” of the bank, he said by email in August. Now 74, he hasn’t held a senior executive role since then and spends his time investing his own money “in the markets,” he said.

“I have no problem whatsoever with Adoboli, never met him and don’t want to either,” said Gruebel. “He was convicted and has to bear the consequences.” Ten executives and traders also saw their UBS careers end in the wake of Adoboli’s actions.

Gruebel’s successor, Sergio Ermotti, pushed through an overhaul that shrank UBS’s risky markets activities and prioritized the firm’s wealth-management business. In 2017, fixed-income trading generated about 5 percent of UBS’s revenue compared with about 16 percent in 2010, while overseeing rich peoples’ fortunes surged to 55 percent from 40 percent. The strategy shift had implications across the European banking industry as Ermotti’s rivals introduced their own makeovers, which often also pushed wealth management and pulled back from trading.

The Trader Who Shattered UBS Now Faces His Own Reckoning

While some analysts saw UBS’s reshaping as inevitable regardless of the Adoboli fiasco, others aren’t so sure. Gruebel had been largely focused on dealing with the wave of post-crisis banking rules rather than anything “transformational” at UBS, said Gildas Surry, who helps oversee about $1.5 billion at Axiom Alternative Investments. The bank “didn’t have any other choice” but to restructure when the losses were revealed, he said.

Banking had taken up Adoboli’s whole professional life. He was born in Accra, Ghana, to a then-United Nations official. As a child, he lived in Israel, Syria and Iraq as the family traveled for work until, at age 12, he was sent to a Quaker boarding school in West Yorkshire, England. He attended Nottingham University, where he was hired by UBS as an intern.

He could have become a British citizen years ago and avoided the deportation risk, but he says that before things went wrong he wasn’t thinking about his immigration status very much.

“You’re not like, I’m committing a crime so I’d better get some protection,” he said, laughing. “I f***ing wish I had.”

Continuing his profession in Ghana might be difficult. Its  market is tiny in comparison to the London world Adoboli is used to. The total value of trades on the Ghana Stock Exchange was 518 million cedis ($106.4 million) in 2017, according to data supplied by the bourse—compared with about $1.72 trillion on the London Stock Exchange.

“I don’t think he will be able to find” work in the country’s banking sector, said Anthony Degbato, head of asset management at SAS Finance Group in Accra. “This is a small market, and his credibility and image comes into question.”

Adoboli would arrive in Ghana at a moment when the regulator is “cleaning up the banking space,” Degbato said. “The law requires background checks and police records so for him not having a clean record, it would be very difficult to do anything in the industry.”

The Trader Who Shattered UBS Now Faces His Own Reckoning

Adoboli’s chances of staying in the U.K. narrowed on Aug. 13, when his application for a judicial review was refused. “Somebody in his position has got a really tough struggle” because “there’s a presumption that it’s in the public interest for the person to be deported,” said Tim Barnden, an immigration attorney at Bates Wells Braithwaite in London who isn’t involved in the case. Adoboli’s lawyer would “need to be providing significant information that hadn't previously been considered.”

A Home Office spokeswoman said foreign nationals who are convicted of crimes in the U.K. shouldn’t doubt the office’s determination to deport them. The department has removed more than 42,800 foreign offenders since 2010, the spokeswoman said, declining to comment on Adoboli in particular.

Adoboli has been treated well since being detained and is hopeful that there might still be a way to avoid deportation, his spokesman, Nick Hopewell-Smith, said Tuesday. His lawyer, Jacqueline McKenzie, expects to make a fresh bid to the Home Office on Tuesday to stop his deportation, she said, adding that it's too soon to publicly discuss details.

Aside from fighting his battle against deportation and making routine trips to the local police station, Adoboli filled his days by giving talks about his experience to groups—and being useful around the house. In a four-bedroom detached home on a quiet cul-de-sac in Livingston, outside Edinburgh, hehelped change diapers and get Roland and Pippa Verhaaf’s two young sons ready for school, his friend Roland said.

Adoboli said in the August interview that he hadn’t thought about what he’d do if he’s deported to Ghana, where his parents and two sisters live.

“I’ll find a way to continue life, and I’ll find a way to do something purposeful for my community because after all I’ve done it in every other setting, including prison,” he said.

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