By Vittorio Hernandez

London, England, United Kingdom

A London magistrate court charged on Sunday former UBS senior trader Kweku Adoboli with fraud for unauthorized trading using the Swiss bank's funds. The illegal transactions caused the bank to lose $2.3 billion.

The 31-year-old Aboboli, a migrant from Ghana is now in custody awaiting trial. The court charge sheet said the senior trader started false accounting offenses in October 2008 and fraud in January 2009.

He is accused of abusing his position, which required him to safeguard and not to act against the financial interest of UBS. Adoboli was assigned in UBS' Delta One desk where his duty was to help clients speculate on or hedge the performance of a basket of securities.

Adoboli appeared in court on Sunday, but did not enter a plea to the charges. He has for his defense criminal law firm Kingsley Napley in London, which was the same company that provided legal advice to former derivatives trader Nick Leeson who caused the 1995 collapse of Barings due to $1.4 billion losses.

According to UBS, Adoboli made legitimate derivative transactions, in the process exposing the bank to different stock market indices, but he entered fictitious hedges since he had no real hedge in place and was violating the risk limits of the bank.

The $2.3 billion loss of UBS is only for the last three months of trading positions made by Adoboli.

Reports said that the former senior trader used to work in UBS's back office, which explains how he kept the trading on the sly. The son of a retired UN employer, Adoboli attended school and university in Britain. He is under court custody until Sept. 22, when he could apply for bail.

The arrest of Adoboli spurred the Financial Services Authority of Britain and its Swiss counterpart, FINMA, to start a probe into why UBS failed to identify Adoboli's secret trades.

The incident also led the three major ratings agencies to review UBS's credit rating which may lead to a possible downgrade because it indicated an apparent failure on the bank's risk control systems.


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London Court Charges UBS Trader With Fraud | Global Viewpoint