Is Rogue Trader Taking a Fall for Corrupt UBS?

By:  Bob Adelmann
09/20/2011
       
Is Rogue Trader Taking a Fall for Corrupt UBS?

Swiss bank UBS trader Kweku Adoboli was arrested early Thursday morning and charged with two counts of false accounting and one count of “suspicion of fraud by abuse of position.”  His position was director of the Delta One trading desk at UBS in London, where he had worked as a trader for the past three years and as a technical advisor for two years before that.

The desk specializes in Exchange Traded Funds (ETFs) which allow investors to take a position in an index without having to purchase each stock represented by that index. Trades were profitable when positions were taken that move higher (long) and the index rises, or that move lower (short) and the index declines. Adoboli had learned the system well, and he lived well, paying $1,570 a week for an apartment in a high-end neighborhood just five minutes’ walking distance from his office.

But something went wrong — terribly wrong — when the Swiss Central Bank announced on September 8 that it would not allow the Swiss franc to rise beyond a certain level versus the euro. The mere whiff of intervention caused the Swiss franc to swoon by more than eight percent in two days.

Swiss bank UBS trader Kweku Adoboli (photo) was arrested early Thursday morning and charged with two counts of false accounting and one count of “suspicion of fraud by abuse of position.”  His position was director of the Delta One trading desk at UBS in London, where he had worked as a trader for the past three years and as a technical advisor for two years before that.

The desk specializes in Exchange Traded Funds (ETFs) which allow investors to take a position in an index without having to purchase each stock represented by that index. Trades were profitable when positions were taken that move higher (long) and the index rises, or that move lower (short) and the index declines. Adoboli had learned the system well, and he lived well, paying $1,570 a week for an apartment in a high-end neighborhood just five minutes’ walking distance from his office.

But something went wrong — terribly wrong — when the Swiss Central Bank announced on September 8 that it would not allow the Swiss franc to rise beyond a certain level versus the euro. The mere whiff of intervention caused the Swiss franc to swoon by more than eight percent in two days.

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Photo: Alleged renegade UBS trader Kweku Adoboli, center, walks to a security van flanked by police officers after appearing at the City of London Magistrates Court in London, Sept. 16, 2011.: AP Images

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