UBS Trader Arrested in London, Worked with ETFs

UBS trader Kweku Adoboli appeared in a London court on Friday to face charges of fraud and false accounting, according to the Wall Street Journal. 

Prosecutors believe the criminal activity may have begun as far as October 2008.

Adoboli was arrested Thursday morning, just hours before UBS said that a rogue trader had caused up to $2 billion in losses. The Journal reports that he has been charged on three counts: two counts of false accounting and one count of fraud by abuse of position.  He has not entered a plea, and is to remain in custody until the next scheduled court appearance on September 22.

The first charge alleges that Adoboli dishonestly falsified the record of an exchange-traded fund transaction, sometime between October 2008 and December 2009 with a view to personal gain or the intent to cause loss to another. The second charge alleges that Adoboli committed a similar act of false accounting also in relation to an ETF and other internal records between January 2010 and September 2011, according to the Journal.

The third charge alleges that Adoboli committed fraud between January 2011 and September 2011. The charge indicates that Adoboli, while a senior trader in global synthetic equities, dishonestly abused that position intending to make a gain for himself and cause losses for UBS.

According to various reports, the 31-year-old has been working on UBS’s Delta One desk, which handles trades for clients, typically helping them to speculate on or hedge the performance of a basket of securities. The group also takes risks with the bank’s own money in arranging trades. UBS has said that no client accounts were affected.

Adoboli is being represented by lawyer Michael Caplan at Kingsley Napley LLP, a London-based law firm that also represented Nick Leeson, the former trader who sunk Britain's oldest merchant bank, Barings, in 1995, according to the Journal.

UBS has not issued a comment.

Risk-control officers at UBS discovered unauthorized trades allegedly made by Adoboli, who in turn admitted to having made the trades, according to a person familiar with the situation, reported the Journal.