UBS $2 billion rogue trade suspect held in London

Sep 15, 2011, 7:44 p.m.
City of London Police Commander Ian Dyson reads a statement outside Wood Street Police Station in London, September 15, 2011. REUTERS/Luke MacGregor

By Victoria Howley and Emma Thomasson

LONDON/ZURICH (Reuters) - Swiss bank UBS said it had lost around $2 billion due to rogue dealing by a London-based trader at the Swiss bank and police said they had arrested a man on suspicion of fraud.

Sources close to the situation named the suspect as 31-year-old Kweku Adoboli, who was working as UBS director of exchange traded funds and so-called Delta 1 trading, according to his profile on LinkedIn.

Adoboli was arrested during the night at UBS's London office, the sources told Reuters.

UBS said it discovered the problem on Wednesday afternoon, but gave no details of the alleged trades involved. Police said they had arrested a man on Thursday after being contacted by the bank and he was in custody.

Adoboli, a University of Nottingham computer science and management graduate, was described by a former landlord as a good tenant of a 1,000 pound ($1,600) per week apartment close to UBS in London's East End, where he lived until recently.

His father, John Adoboli, a retired United Nations employee from Ghana, said he knew the financial sector was a high risk area but he had no doubts about his son's competence and integrity.

"From what the reports are saying, it could be that he made a mistake or wrongful judgment," he told Reuters by phone from the Ghanaian port city of Tema, saying he had to speak to his son before drawing any conclusions.

"I've been calling his phone since and I am hoping he'd be granted bail soon so I can hear his side of the story," he said.

UBS stock ended the day down 10.8 percent, its lowest close since March 2009, after the bank said it might post a third-quarter loss due to the trading, a huge blow as it struggles to rebuild credibility after years of crises.

Late in the day, Moody's said it had placed the bank's long-term debt and deposit ratings on review for a possible downgrade, a further blow to the bank.

The loss effectively cancels out the 2 billion Swiss franc ($2.3 billion) saving UBS hoped to make in a cost-cutting drive detailed last month involving 3,500 job cuts.

It also threatens the future of UBS's investment bank, which is being reviewed by chief executive Oswald Gruebel as part of a wide-ranging restructuring after heavy losses during the credit crisis and a damaging scandal over bankers helping rich U.S. clients dodge taxes.

And it undermines claims by the Swiss bank and the industry that such events are a thing of the past.

UBS, which said no client positions were affected, is scheduled to hold an investor day on November 17 at which it was expected to announce a major overhaul of the investment bank.

"The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2 billion," the bank said in a statement.

UBS employed almost 18,000 people in its investment bank at the end of June, most of them outside Switzerland, particularly in London and the United States.

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