UBS man charged over $2 billion rogue trade

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British police charged trader Kweku Adoboli over a $2 billion fraud at Swiss bank UBS and he will appear in court later Friday, a spokeswoman said.

Prosecutors gave the green light for Adoboli to be charged over unauthorised trades at the bank's London offices.

"City of London Police has since charged the 31-year-old with fraud by abuse of position and false accounting," the spokeswoman said.

"He remains in police custody and is due to appear at City of London magistrates (court) this afternoon."

Adoboli, the son of a retired Ghanaian United Nations official, was arrested at the bank at 3:30 am (0230 GMT) Thursday, shortly before UBS announced that it had lost $2 billion (1.46 billion euros) in unauthorised trading.

Police said the investigation continued "and officers continue to work in close collaboration with the Serious Fraud Office, the Financial Services Authority and the Crown Prosecution Service."

The massive losses could force UBS to reduce the size of its investment banking unit and carry out sweeping job cuts, according to reports in Switzerland.

The bank, which had to be bailed out by the Swiss state after it was badly hit by the subprime crisis in 2007-2008, had hoped to reap the benefits of 3,500 job cuts it announced last month.

Now thousands more jobs could be slashed from its global workforce of 65,000, newspapers said.

Having plummeted by more than 10 percent when the losses were revealed on Thursday, UBS shares rallied on Friday, rising almost 3.5 percent to 10.09 Swiss francs at 1215 GMT.

Adoboli is believed to have worked as a director of Exchange Traded Funds (ETFs) in the equities department of the bank's London offices near Liverpool Street station.

ETFs are shares that can be traded and that track movements in other indexes, meaning they are highly susceptible to short-term volatility in prices.

The Serious Fraud Office said it had recently warned about the "inherent dangers" of ETFs "because they are not transparent".

A picture emerged of Adoboli as a fiercely ambitious man who often worked nights in the office but masked the pressures of his job with an amiable personality and a penchant for parties at his trendy bachelor flat.

Adoboli was born in Africa but educated at a £20,000-per-year ($31,500) boarding school in Yorkshire, northern England, where he was head boy.

He graduated from the University of Nottingham in central England with a degree in e-commerce and digital business in 2003.

According to the Financial Services Authority watchdog, he joined UBS in 2006 as a trainee investment adviser.

The case comes three years after trader Jerome Kerviel ran up losses of 4.9 billion euros at French bank Societe Generale through a similar type of trading to the transactions in which Adoboli specialised.

Adoboli is being represented by Kingsley Napley, the law firm which acted for Nick Leeson, the British trader whose losses brought down Barings bank in 1995, a spokeswoman for the firm said.

The latest case has raised questions over the level of regulation of the financial sector in Britain, which was tightened following the Kerviel affair.

"I don't think it's a breakdown of the whole financial system," said Manoj Ladwa, a senior trader at ETX Capital.

"The problem is within UBS because their risk management systems weren't quick enough to pick up that this trader had built very big positions within a very short period of time," he told AFP.

Following the arrest, ratings agency Moody's said it was considering lowering UBS's credit rating.

Moody's said its review of the rating will focus on "ongoing weaknesses in the group's risk management and controls that have become evident again."

© 2011 AFP

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