Bloomberg News

UBS Trader Adoboli May Ask for Bail in Unauthorized Trades Case

September 21, 2011

Sept. 22 (Bloomberg) -- Kweku Adoboli, the UBS AG trader accused of fraud and false accounting that led to a $2.3 billion loss for Switzerland’s largest bank, may ask a court to be released on bail while he awaits trial.

Adoboli’s lawyers may offer that he surrender his passport, get an electronic tracking device, stay confined to his home, or get a letter from the Ghanaian embassy promising not to issue him any travel documents, said Steven Francis, a regulatory partner at Reynolds Porter Chamberlain who isn’t involved in the case. Adoboli, 31, holds a Ghanaian passport.

“I don’t think it’s an open and shut case as to whether he’ll get bail,” Francis said in a London telephone interview. “He’s so high-profile now that the prospect of him disappearing off the face of the Earth is slim. On the other hand, no magistrate ever got fired for keeping someone in custody.”

Police have held Adoboli since his Sept. 15 arrest on suspicion of making the unauthorized trades. Prosecutors charged the trader with fraud and false accounting and a magistrates court ordered him held in custody until today’s hearing. If convicted of fraud, he faces as many as 10 years in prison, according to prosecutor sentencing guidelines. Time spent in custody beforehand would be deducted from any sentence.

Adoboli’s lawyers at Kingsley Napley declined to comment, Melanie Riley, a spokeswoman for the firm, said.

The alleged $2.3 billion loss is the largest discovered at a bank since former Societe Generale SA derivatives trader Jerome Kerviel caused a 4.9 billion-euro ($6.7 billion) loss in 2008.

Kerviel Hedges

Kerviel amassed 50 billion euros in unauthorized positions, concealed with faked hedges. A Paris court ordered him last year to repay the full amount of the loss and sentenced him to three years in jail. He’s appealing that verdict.

Adoboli worked for UBS’s investment bank on its Delta One desk, which handles trades for clients, typically helping them speculate on, or hedge the performance of, a basket of securities. The group also trades with the bank’s own money. Zurich-based UBS has said that no client positions were affected.

Adoboli “dishonestly abused” his position as a senior trader, which required him “to safeguard, or not to act against, the financial interests of UBS,” according to court documents.

The loss came from trading in Standard & Poor’s 500, DAX and EuroStoxx index futures over the past three months, according to the bank. Risk on the trades was masked by fictitious positions, UBS said.

The FSA and the Swiss Financial Market Supervisory Authority last week opened a joint investigation into control failures at UBS that allowed the trades to go undetected.

--Editors: Christopher Scinta, David E. Rovella

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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