JPMorgan, UBS, Barclays, Citigroup and RBS have been fined $5.7 billion in the US for charges including manipulating the foreign exchange market.
Four of them – JPMorgan, Barclays, Citigroup and RBS – have agreed to plead guilty to US criminal charges.
UBS will plead guilty to rigging benchmark interest rates.
Barclays was fined the most, $2.4 billion, as it did not join other banks in November to settle investigations by UK, US and Swiss regulators.
The bank is also sacking eight employees involved in the scheme.
US Attorney General Loretta Lynch said that “almost every day” for five years from 2007, currency traders used a private electronic chat room to manipulate exchange rates.
Their actions harmed “countless consumers, investors and institutions around the world”, Loretta Lynch said.
Separately, the Federal Reserve fined a sixth bank, Bank of America, $205 million over foreign exchange-rigging. All the other banks were fined by both the Department of Justice and the Federal Reserve.
Regulators said that between 2008 and 2012, several traders formed a cartel and used chat rooms to manipulate prices in their favor.
One Barclays trader, who was invited to join the cartel, was told: “Mess up and sleep with one eye open at night.”
Several strategies were used to manipulate prices and a common scheme was to influence prices around the daily fixing of currency levels.
A daily exchange rate fix is held to help businesses and investors value their multi-currency assets and liabilities.
Until February, this happened every day in the 30 seconds before and after 16:00 in London and the result is known as the 4pm fix, or just the fix.
In a scheme known as “building ammo”, a single trader would amass a large position in a currency and, just before or during the fix, would exit that position.
Other members of the cartel would be aware of the plan and would be able to profit.
The fines break a number of records. The criminal fines of more than $2.5 billion are the largest set of anti-trust fines obtained by the Department of Justice.
Meanwhile, the $925 million fine imposed on Citigroup by the Department of Justice was the biggest penalty for breaking the Sherman Act, which covers competition law.
The guilty pleas from the banks are seen as highly significant as banks have settled previous investigations without an admission of guilt.
The Attorney General warned that further wrongdoing would taken extremely seriously: “The Department of Justice will not hesitate to file criminal charges for financial institutions that reoffend.
“Banks that cannot or will not clean up their act need to understand – it will be enforced.”
Swiss banking giant UBS has confirmed it is being investigated by US authorities into whether it helped Americans evade taxes through investments banned in the US.
According to the bank, US regulators were investigating potential sales of so called “bearer bonds”.
These bonds can be transferred without registering ownership, enabling wealthy clients to potentially hide assets.
“We are cooperating with the authorities in these investigations,” USB said.
The fresh investigation by the US Attorney’s Office for the Eastern District of New York and from the US Securities and Exchange Commission comes after UBS paid $780 million in 2009 to settle a separate Justice Department tax-evasion probe.
The move comes as authorities in a range of countries are considering examining HSBC’s actions in helping more than 100,000 wealthy individuals avoid paying tax.
UBS made the announcement as it revealed a better-than-expected 13% rise in fourth quarter net profit to 963 million Swiss francs.
However, it warned the increased value of the Swiss franc relative to other currencies, following the Swiss National Bank’s decision to abandon the cap on the currency’s value against the euro, would “put pressure” on its profitability.
“The increased value of the Swiss franc relative to other currencies, especially the US dollar and the euro, and negative interest rates in the eurozone and Switzerland will put pressure on our profitability and, if they persist, on some of our targeted performance levels,” it warned.
UBS results for the full year, were hit by more than $1 billion to settle past scandals. In November, it was one of six banks fined by UK and US regulators over their traders’ attempted manipulation of foreign exchange rates, paying 774 million Swiss francs in total.
It also paid $300 million in the second quarter to settle charges it helped wealthy German clients evade tax.
The Department of Justice (DOJ) is continuing to investigate UBS over currency manipulation allegations.
Price fixing, although it resembles the strong-armed business approach one might associate with the criminal underworld, is a white collar crime often perpetrated by company executives.
Just as a few local gangs might get together to agree on who gets to operate in which turf or who might handle the prostitution in a certain area, corporate executives get together in conference calls or at high-powered business powwows and settle secret deals on how pricing for various goods and services might be controlled.
That said, price fixing scams can be so far-reaching into a business sector that they can reach gigantic proportions involving some of the world’s best-known companies and some of the biggest dollar amounts ever associated with crime.
Rolling Stone Magazine recently ran a lengthy article on the Libor fixing scandal that could be the largest crime in terms of dollar losses ever committed. The world’s largest banks in the United States, Europe and Asia, including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland ,have been caught up in that mess. The actual misdeed was bankers reporting false data to British regulators to try to manipulate the London interbank offered rate, which is supposed to be the average rate banks use when they loan money to each other. But some bankers tried to tip the scales their way to enhance specific deals or to make the bank appear healthier than it was, because a better position is appealing to stockholders.
Price fixing is a white collar crime often perpetrated by company executives
The problem is that an estimated six trillion dollars in commercial and consumer loans use the Libor as a benchmark rate. Tips the rate one way or another and it affects millions of consumers around the world.
Price fixing scams are frequently put into action by companies that are not exactly household names. Look for Ford Motor Company and price fixing online, for example, and you will see Ford is suing auto part suppliers for price fixing. That’s because companies like Ford are too much in the public eye to fix prices. If they change the headlight design of a car that becomes headline news, let alone trying to sneak a price-fixing scheme past the public.
Instead companies like Toyo Tire & Rubber Co., a Japanese company with a client list that included Toyota, Subaru and Nissan, was charged with fixing prices of anti-vibration rubber parts. In November 2013, Toyo settled with the U.S. Justice Department, agreeing to pay $120 million to have an investigation against it dropped..
A series of settlements over price fixing involving well-known and lesser-known airlines has been announced in recent years, but here, again, it is the air cargo side of the business — a little less visible to the average consumer — that has included, to date, 23 settlements by companies that colluded to control prices on air shipping services.
In February, the global law firm Hausfeld LLP, announced that Cathay Pacific had agreed to pay $65 million to settle charges of price fixing for its shipping services. That added to an already impressive list of class action victories that involved All Nippon Airways, American Airlines, British Airways, SAS, Cargolux, Lufthansa and 15 others who paid fines of $3.2 million (Malaysia Airlines) to $115 million (Korean Air) to settle charges against them. In total, the conspiracy has resulted in $758 million in fines that largely get dispersed to Hausfeld’s class action clients who were cheated by the collusion.
Price fixing impacts consumers in two ways. First, controlling prices generally results in artificially high prices for goods or services. Secondly, price fixing can box out competing companies, which hurts their business, resulting in fewer jobs.
Regulators have recognized that Libor fixing has the potential to due considerable harm to consumers as a class and have doled out fines that are among the largest ever meted out for corporate malfeasance. By the end of 2013, financial firms had coughed up $2.3 billion to settle charges of rate manipulation, including Deutsche Bank and Société Générale, which paid fines of $633 million and $606 million, respectfully, to settle charges against them.
Swiss bank UBS has reached an agreement with US housing agencies to settle claims it had mis-sold mortgage investments.
UBS said it had reached an agreement in principle with the Federal Housing Finance Agency (FHFA) over the investments sold between 2004 and 2007.
In its statement, UBS also said it expected its second-quarter net profits for shareholders to total 690 million Swiss francs ($734 million).
UBS set aside a total of 865 million francs in the quarter to cover litigation.
Of that, 100 million francs is related to a deal with the UK authorities to disclose the account details of British tax evaders and hand back unpaid taxes.
The bank said that its wealth management business continued to see large inflows – totalling 10.1bn francs during the three-month period, the highest in six years.
Its US private banking business received an additional 2.7 billion francs of new client money, although 2 billion francs was withdrawn by clients from its asset management unit.
The influx of money comes despite the entire Swiss banking sector coming under scrutiny from foreign tax authorities and its own regulators.
UBS is currently under investigation from French and German authorities over allegations that it enabled tax evasion.
UBS reached an agreement in principle with the FHFA over the investments sold between 2004 and 2007
UBS’s board is refocusing the bank on serving wealthy clients, slimming down its investment banking and trading operations and cutting 10,000 jobs in the process.
The decision to make the investment bank subservient to its private banking business came after a string of scandals, including heavy losses on US mortgages during the financial crisis, losses incurred by the rogue London trader Kweku Adoboli, and UBS involvement in Libor-rigging.
The deal with the FHFA relates to residential mortgage-backed securities sold during the past decade’s US property bubble to federal housing agencies.
The underlying mortgages behind the investments later went bad, with many borrowers proving unable to repay their loans.
UBS is one of 18 international financial firms accused by the FHFA of mis-representing the mortgages as being better quality than they really were.
The FHFA is also representing Freddie Mac and Fannie Mae, which had to be rescued by the US government during the 2008 financial crisis.
The settlement comes after UBS and 13 other banks failed to have an appeals court intervene in the case, following what the banks claimed were “gravely prejudicial” rulings against them.
The bank’s estimated earnings were better than the 550 million – 575 million Swiss francs that analysts had been expecting, and up from 425 million francs during the same period a year ago.
Its share price rose more than 3% in early trading on Monday following the announcement.
UBS will announce its official results for the second quarter of the year on July 30.
The Financial Services Authority (FSA) has fined UBS $47.6 million for failings that led to trader Kweku Adoboli losing $2.2 billion.
The fine, the third largest imposed by the FSA, was for “system and control failings” that allowed Kweku Adoboli to trade in London well beyond authorized limits.
Kweku Adoboli was last week convicted of two counts of fraud and sentenced to seven years in prison.
UBS said it was “pleased that the chapter has been concluded”.
The FSA, which conducted the investigation into failings at the bank with its Swiss counterpart, Finma, said there were serious weaknesses at the Swiss bank.
It said in a statement: “UBS failed to take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems, and failed to conduct its business from the London Branch with due skill, care and diligence.”
The FSA’s director of enforcement and financial crime, Tracey McDermott, said faulty controls had allowed the losses to mount to what was the largest trading loss in the country.
“UBS’s systems and controls were seriously defective,” she said.
“As a result, Adoboli, a relatively junior trader, was allowed to take vast and risky market positions, and UBS failed to manage the risks around that properly.”
Kweku Adoboli, the 32-year-old Ghana-born son of a diplomat, joined UBS in 2003, becoming a trader in 2006.
He worked in UBS’s global synthetic equities division (GSE), buying and selling exchange traded funds (ETFs), which track stocks, bonds and commodities.
He was arrested in September last year.
The Financial Services Authority has fined UBS $47.6 million for failings that led to trader Kweku Adoboli losing $2.2 billion
Southwark Crown Court was told that he was “a gamble or two away from destroying Switzerland’s largest bank”.
The judge said there was “a strong streak of the gambler” in him.
But, during evidence, Kweku Adoboli said everything he had done was aimed at benefiting the bank, where he viewed his colleagues as “family”.
He said he had “lost control in the maelstrom of the financial crisis”, but had been doing well until he changed from a conservative “bearish” position to an aggressive “bullish” stance under pressure from senior managers.
Kweku Adoboli told the jury that staff were encouraged to take risks until they got “a slap on the back of the wrist”.
The fine was set at 15% of the revenue of the division where Kweku Adoboli worked and takes account of the revenue generated by the business area where the weak controls occurred.
UBS said it had made a number of substantial changes since discovering the losses, including fixing the weakness in its financial reporting.
The bank added it was retraining staff on the importance of risk management and had changed the way it evaluated and compensated employees.
UBS is changing its own structure to make itself a simpler organization.
The bank’s chief executive, Oswald Gruebel, left the company in the aftermath of the scandal.
His successor, Sergio Ermotti, announced a major restructuring last month to run down the large, risky parts of the investment banking division.
UBS said it had fully co-operated with the regulators’ investigations and that it accepted their findings and the penalties incurred.
UBS’s fine was discounted from the original level of $65 million for early settlement.
Switzerland’s financial regulator Finma said in a statement that it would also check whether UBS had adequate capital backing for its operational risks.
Finma said it had identified “serious deficiencies in risk management controls” and that it would appoint a third party to make sure proper measures were introduced.
UBS has been banned by regulators from making new acquisitions and it also needs to get prior approval from Finma for any new business initiatives.
Kweku Adoboli, the City trader who lost $2.2 billion of Swiss bank UBS’s money, has been found guilty of two counts of fraud.
Kweku Adoboli, 32, of Whitechapel, east London, denied four charges of false accounting and two of fraud between October 2008 and September 2011.
The prosecution told Southwark Crown Court he was “a gamble or two away from destroying Switzerland’s largest bank”.
Kweku Adoboli, who was cleared of four charges of false accounting, was jailed for seven years.
Kweku Adoboli, who was arrested on 15 September 2011, worked in UBS’s global synthetic equities division, buying and selling exchange traded funds (ETFs), which track stocks, bonds and commodities.
He had joined the bank as a junior trader in 2006.
The court was told KwekuAdoboli lost $2.2 billion of the bank’s money in “unprotected, unhedged, incautious and reckless” trades.
But Kweku Adoboli, the Ghana-born son of a diplomat, told the jury his senior managers were aware of his actions and encouraged him to take risks.
He claimed he lost control over his trades during a period of market turbulence last year.
The court heard that at one point he stood to lose the bank $12 billion.
Kweku Adoboli was convicted of one count of fraud earlier on Tuesday.
The judge, Justice Keith, gave the jury a majority verdict direction, saying they could deliver a 9-1 verdict on the second fraud charge and the four false accounting charges.
Kweku Adoboli, the City trader who lost $2.2 billion of Swiss bank UBS’s money, has been found guilty of two counts of fraud
The jury had been reduced to five men and five women after two jurors were discharged.
Kweku Adoboli was found guilty by a majority verdict of the second fraud charge but acquitted of the four outstanding false accounting charges.
The prosecution said Kweku Adoboli had been a gambler who believed he had the “magic touch”.
But, giving evidence, Kweku Adoboli said everything he had done was aimed at benefiting the bank, where he viewed his colleagues as “family”.
Kweku Adoboli said he had “lost control in the maelstrom of the financial crisis”, and was doing well until he changed from a conservative “bearish” position to an aggressive “bullish” stance under pressure from senior managers.
He told the jury that staff was encouraged to take risks until they got “a slap on the back of the wrist”.
After the verdicts, Detective Chief Inspector Perry Stokes, from the City of London Police, which investigated Kweku Adoboli, said: “This was the UK’s biggest fraud, committed by one of the most sophisticated fraudsters the City of London Police has ever come across.
“To all those around him, Kweku Adoboli appeared to be a man on the make whose career prospects and future earnings were taking off. He worked hard, looked the part and seemingly had an answer for everything.
“But behind this facade lay a trader who was running completely out of control and exposing UBS to huge financial risks on a daily basis.
“Rules put in place to protect the bank’s position and the integrity of the markets were being bypassed and broken by a young man who wanted it all and was not willing to wait.
“When Adoboli’s pyramid of fictitious trades, exceeded trading limits and non-existent hedging came crashing down, the repercussions were felt in financial centres around the world.
“Now, just a year on, he is facing the reality that he was not above the law and will be made to pay for his crimes. Others who tread a similar path to his can expect the same fate.”
Swiss bank UBS lost 349 million Swiss francs ($356 million) by investing in Facebook shares, more than halving its profits.
UBS’s second quarter profits were $425 million Swiss francs ($434 million), compared with 1bn francs a year earlier.
Facebook was valued at $104 billion at its flotation in May, but the shares are now 39% below the initial sale price.
As a result, UBS’s investment bank reported a loss in the quarter, compared with a profit of 730 million Swiss francs a year earlier.
Swiss bank UBS lost 349 million Swiss francs ($356 million) by investing in Facebook shares, more than halving its profits
UBS warned that failure to resolve problems within Europe’s banking system “accentuated by the reduction in market activity levels typically seen in the third quarter” meant its next set of earnings were likely to be flat.
As a result, UBS said it would look at making further cost savings. The Swiss group is already in the process of cutting 3,500 jobs.
The company also said it was on target to meet new Basel III bank rules and would not have to issue new shares to generate additional money.
Its ratio of high quality – tier 1 – capital to lending was 8.8%, just shy of the 9% that will be required from next year.
Deutsche Bank has reported a 63% fall in second quarter earnings to 375 million Euros ($460 million) from 969 million Euros last year.
Like UBS, Deutsche blamed the economic downturn in Europe and the US for lower fees and commissions as firms cut back on big deals and share sales.
In a joint statement, Deutsche’s co-chairmen Jürgen Fitschen and Anshu Jain said: “The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank.”
Kweku Adoboli, the trader who allegedly gambled away a record of $2.3 billion, has pleaded not guilty to two charges of false accounting and two of fraud while working for Swiss bank UBS at Southwark Crown Court today.
Kweku Adoboli, 31, of Clark Street, east London, appeared at Southwark Crown Court accused of unauthorized trading that lost UBS about $2.3 billion.
The alleged rogue trader worked for UBS’s global synthetic equities division, buying and selling exchange traded funds, which track different types of stocks, bonds or commodities such as metals.
Kweku Adoboli is accused of dishonestly using his position to try to make a personal gain, and causing UBS losses or exposing the bank to the risk of loss.
City watchdog the Financial Services Authority and its Swiss counterpart have launched an investigation into why UBS failed to spot allegedly fraudulent trading.
Kweku Adoboli, the UBS trader who allegedly gambled away a record of $2.3 billion, has pleaded not guilty to two charges of false accounting and two of fraud while working for Swiss bank UBS at Southwark Crown Court today
Kweku Adoboli, the son of a former Ghanaian official to the United Nations, joined the bank in a junior capacity in 2002.
Charges relate to the period between October 2008 and September last year.
Prosecutors allege he gambled away the cash while buying and selling exchange traded funds.
Judge Alistair McCreath granted Kweku Adoboli’s new defense team an extra month to consult with their client after a previous appearance.
Kweku Adoboli switched legal teams in November.
He has hired London law firm Bark & Co, which specializes in fraud cases, in place of Kingsley Napley.
Judge Alistair McCreath set a provisional trial date of 3 September.
The judge remanded Kweku Adoboli in custody. A pre-trial management hearing will take place on 9 April.
Kweku Adoboli, the suspected UBS rogue trader said today that he was “sorry beyond words” for the record $2.3 billion losses suffered by Swiss banking giant.
Kweku Adoboli sat in the dock at City of London magistrates’ court as his barrister Patrick Gibbs QC told the court:
“He is sorry beyond words for what has happened here.
“He went to UBS and told them what he had done and he stands now appalled at the scale of the consequences of his disastrous miscalculations.”
Kweku Adoboli will face a second count of fraud in addition to two charges of false accounting over three years at UBS
Kweku Adoboli, 31, will face a second count of fraud in addition to two charges of false accounting over three years at UBS.
Magistrates remanded Kweku Adoboli in custody until October 20 at the first of two committal hearings.
Prosecutors allege Adoboli lost the cash while working at UBS’s global synthetic equities division, buying and selling exchange traded funds, which track different types of stocks, bonds or commodities such as metals.
Kweku Adoboli’s lawyer, Louise Hodges, of solicitors Kingsley Napley, has made no application so far for bail for her client.
The alleged fraud offence took place between January 1 and September 14 this year.
Kweku Adoboli, son of a former Ghanaian official to the United Nations, joined the Swiss firm in a junior capacity in 2002.
The fraud charge against the rogue trader reads:
“While occupying a position, namely being a senior trader with Global Synthetic Equities, in which you were expected to safeguard, or not to act against, the financial interests of UBS Bank, you dishonestly abused that position intending thereby to make a gain for yourself, causing losses to UBS or to expose UBS to risk of loss.”
The two accusations of false accounting claim that Kweku Adoboli “falsified a record, namely an exchange traded fund transaction”
The two accusations of false accounting – which date back to 2008 – claim that Kweku Adoboli “falsified a record, namely an exchange traded fund transaction”.
After Kweku Adoboli’s first appearance in court, UBS revised upwards the cost of the rogue trading to 2.3 billion US dollars (£1.5 billion) after previously saying the incident had cost it in the range of two billion US dollars (£1.3 billion).
British Financial Services Authority and its Swiss counterpart have launched an investigation into why UBS failed to spot allegedly fraudulent trading.
Swiss banking giant UBS has admitted that the losses allegedly racked up by “rogue trader” Kweku Adoboli has risen from $2 billion to $2.3 billion.
UBS said the huge loss was caused by unauthorized trades on stock index futures made over the past three months.
It said the transactions Kweku Adoboli made were within normal limits and slipped through risk controls due to “fictitious trades” in complex financial instruments called exchange traded funds (ETFs), which were used to cover up losses.
Kweku Adoboli is charged with $2.3 billion fraud at Swiss banking giant UBS
According to UBS, “the true magnitude of the risk exposure was distorted” because the hedges that traders are required to put in place had been fabricated.
The bank also suggested that the trades involved “unauthorized speculative” bets on various S&P 500, Dax and Eurostoxx index futures, rather than on the Swiss franc, as some had thought.
Swiss banking giant also claims that the non-existent hedges entered into its records were “fictitious, forward-settling, cash ETF positions”, trades that had never actually been executed.
UBS also countered suggestions that it did not notice the trades until Kweku Adoboli came forward.
UBS said that Kweku Adoboli, who was charged on Friday with fraud and false accounting, had been responding to the bank’s inquiries.
It appears that the fraud came to light last Wednesday during a review of Kweku Adoboli’s trading book, which it has now unwound.
UBS has now launched an internal investigation regarding the failure of its risk systems.
UBS board of directors had set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the trades and the bank’s control systems.
UBS stunned markets on Thursday when it announced unauthorized trades had lost it about $2 billion.
The figure was raised by a further $300 million on Sunday, and chief executive Oswald Gruebel said the alleged fraud would have consequences for strategy and possibly also for himself.
The huge loss is a heavy blow to the reputation of Switzerland’s biggest bank, which had just started to recover after its near collapse during the financial crisis and a damaging U.S. investigation into its aiding wealthy Americans to dodge taxes.
By 7:45 a.m. UBS shares were down 1.6% at 10.10 francs, outperforming a 2.6% slide on the European banking stocks index.
UBS CEO Oswald Gruebel said he would not be resigning, and said calls for his resignation were “purely political” and that he was “not thinking about stepping down”.
Gruebel added that while he bore ultimate responsibility, he did not feel “guilty” for failing to prevent the costly and embarrassing incident.
Gruebel defiant stance comes amid suggestions that Swiss regulators could tell the bank to hive off or close down its investment banking division, which houses the “Delta One” desk where Kweku Adoboli worked.
The Financial Services Authority and Swiss regulators have drafted in accountancy firm Deloitte to investigate the affair.
Meanwhile, UBS senior independent director David Sidwell, a former finance chief at JP Morgan Chase, is leading the bank’s own probe into the matter.
Kweku Adoboli, the suspected rogue trader accused of a staggering $2 billion fraud told friends he needed “a miracle” days before he was arrested.
Kweku Adoboli, 31, posted a strange message on his Facebook account as he tried to recover enormous losses he had made through illegal trading.
London Police detained the suspected rogue trader, who works for Swiss banking group UBS in raid at 3:30 a.m. on Thursday at his luxury London flat.
Kweku Adoboli is Ghanaian origin, but he was privately educated in UK and is the son of a retired UN worker. He is accused of being responsible for the biggest loss ever accrued by a single trader based in London.
The $2 billion fraud figure easily dwarfs the $1.3 billion lost by rogue trader Nick Leeson, the man behind the collapse of Barings bank in 1995.
Kweku Adoboli enjoyed parties and the company of attractive women
The same amount was intended by UBS to save by cutting 3,500 jobs worldwide.
Speculation was mounting that he may have been caught out after the Swiss Central Bank unexpectedly devalued the franc last week, producing mammoth losses on one of his currency trades.
On Tuesday, September 6, a Kweku Adoboli’s final Facebook message read: “Need a miracle.”
Kweku Adoboli’s boss John Hughes is reported to have quit his job in the aftermath of the scandal. Sources said Hughes would have faced serious questions about supervision of staff. The former boss could not be reached for comment last night.
It is understood that UBS have discovered the $2 billion loss late on Wednesday afternoon.
City of London Police commander Ian Dyson said the force was tipped off by UBS at 1:00 a.m. on Thursday.
Within three hours, police had entered UBS headquarter and had also arrested Kweku Adoboli, who according to sources was a “work-hard, play-hard” trader who enjoyed the company of a series of attractive women at his flat in Whitechapel, East London.
According to some sources, Adoboli earned around $300,000 a year, plus up to $600,000 more in bonuses.
Kweku Adoboli was formally arrested on suspicion of fraud by abuse of position, and was still in custody last night. Police are liaising closely with the Crown Prosecution Service and a decision on charges could be made over the weekend.
Kweku Adoboli was detained on the anniversary day of the collapse of U.S. investment bank Lehman Brothers three years ago.
Rogue traders act independently of colleagues (often recklessly), harming both clients and the firm they work for. In most cases this type of trading is high risk and can create enormous losses.
Police questioned Kweku Adoboli about the fraud, but it was unclear how he was allegedly able to lose such eye-watering sums without being detected by UBS’s risk management team.
The type of trade Kweku Adoboli used is the same as the one used by Jérôme Kerviel, the rogue trader who amassed losses of 4.9billion euros at Société Générale in 2008.
Kweku Adoboli joined UBS in 2006 as a trainee investment adviser. He took on a more senior role as a trade support analyst in 2007 before assuming his present role in one of the banking world’s most important trading areas.
According to his LinkedIn profile, Kweku Adoboli worked as director of Exchange Traded Funds (ETF) and Delta-1 Trading at UBS Investment Bank.
ETFs are an investment fund traded on stock exchanges, much like stocks, which holds assets such as stocks, commodities, or bonds.
Kweku Adoboli is the suspected rogue trader who was arrested in London at early hours today on suspicion of losing $2 billion of UBS, the major investment Swiss bank group.
Ghanaian Kweku Adoboli, 31, was detained on suspicion of committing fraud while working at Swiss bank UBS, after police raided his home at 3.30am.
After the raid UBS shares fell by 8%, as the bank warned that the unauthorized trading could tip the firm into a third-quarter loss.
Kweku Adoboli, the rogue trader arrested in London for $2 bn UBS losses (Facebook image)
UBS CEO, Oswald Gruebel sent a memo to UBS staff yesterday that the rogue deals had been discovered within the past 24 hours.
Gruebel told staff:
“We regret to inform you that yesterday we uncovered a case of unauthorised trading by a trader in the Investment Bank. We have reported it to the markets in line with regulatory disclosure obligations.
“The matter is still being investigated, but we currently estimate the loss on the trades to be around 2 billion US dollars.”
Oswald Gruebel vowed to “establish exactly what has happened” and underscored that “no client positions were affected”.
The UBS CEO urged staff to remain focused on their clients as the investigation continues.
“We want to reassure you that we, together with the rest of the management, are working closely with the Investment Bank’s management and risk and controlling to get to the bottom of the matter as quickly as possible, and will spare no effort to establish exactly what has happened. We will keep you updated on the progress of our investigation.”
Trader Kweku Adoboli worked at the UBS’ headquarters in the very heart of London’s finance district.
UBS has around 65,000 employees worldwide, but it said the bank has recently reduced its staff by 3,500 as part of a bid to save $2.3 billion by the end of 2013.
The cuts came as it said pre-tax profits dropped 23% on the previous quarter to $2 billion at the end of June.
As well as the economic downturn, UBS said regulatory changes such as the Basel rules, which require the bank to hold more capital, were behind the need for the cost reductions.
Despite being one of the biggest wealth managers in the world, UBS has a chequered recent history.
In 2008, UBS was rescued by the Swiss state following huge losses on toxic assets held by its investment bank.
The bank then became embroiled in a serious tax evasion dispute with US authorities and was forced to hand over 300 client names and pay a $780 million fine. There was then a second case in which bank agreed to hand over data on 4,450 American clients.
A restructuring then saw UBS launch a multi-million dollars advertising campaign which used the slogan ‘we will not rest’.
UBS Investment Bank’s offices in Stamford, Connecticut boasts the largest trading floor in the world – it is the size of two American football pitches, and sees more than $1 trillion in assets traded every day.
London police have arrested a man in connection with allegations of unauthorized trading which has cost Swiss banking group UBS an estimated $2 billion.
The 31 year-old man was detained in the early hours of Thursday and remains in London Police custody.
UBS shares fell today 8% after it announced it was investigating rogue trades which would mean the bank making a loss for the third quarter of 2011.
UBS, the Swiss bank said no customer accounts were affected.
London police have arrested a man in connection with allegations of unauthorized trading which has cost Swiss banking group UBS an estimated $2 billion
City of London Police said:
“We can confirm we arrested a 31-year-old man at 3:30am on suspicion of fraud by abuse of position.”
In a letter to its 65,000 staff, UBS said:
“The matter is still being investigated, but UBS’s current estimate of the loss on the trades is in the range of $2bn.
“It is possible that this could lead UBS to report a loss for the third quarter of 2011. No client positions were affected.
“While the news is distressing, it will not change the fundamental strength of our firm.
“We urge you to stay focused on your clients, who are counting on you to guide them through these uncertain times,” the bank said.
“All the clever systems that the banks now have still cannot stop a determined individual .”
In 2008, UBS was rescued by the Swiss state following huge losses on toxic assets held by its investment bank.
The bank then became embroiled in a serious tax evasion dispute with US authorities and was forced to hand over 300 client names and pay a $780 million fine. There was then a second case in which bank agreed to hand over data on 4,450 American clients.
UBS declined to say in which department, or country, the rogue trader operated. However, there is already speculation that the losses may have occurred in foreign exchange trades.
At the beginning of September, the Swiss Central Bank shocked the markets by capping the franc against the euro at 1.20 francs. The move sent the franc-euro pairing up 10%, and it is rumored that some traders lost money.