Kweku Adoboli denied bail in UBS fraud trial

Saturday, 04 February 2012 09:51

UBS rogue trader, Kweku Adoboli  has been denied bail at Southwark Crown Court where he is facing charges of fraud and two charges of false accounting.

It was Mr Adoboli's first request for bail since being arrested in September.

Judge Alistair McCreath denied the bail request saying, “These are serious allegations backed up with cogent evidence.”

Mr Adoboli, 31, from East London is accused of losing £1.4 billion, causing UBS losses, exposing the bank to the risk of loss and trying to make a personal gain.

Mr Adoboli pleaded not guilty to the charges and this means that an extended trial is likely.

The Financial Services Authority (FSA) the UK regulator and Swiss regulators are opening investigations into the trading scandal at UBS. The FSA's findings in an initial trial has prompted the regulator to extend its investigation and pass it onto its enforement division. This means that UBS could face possible fines if errors are discovered.

Mr Adoboli's trial, which is expected to last for months, will see the working practices of traders at UBS forensically examined, potentially highlighting inappropriate working practices at UBS. In reality, if poor working practices did occur, it is almost certain that they happen at other banks. However, UBS will be the bank in the spotlight at the trial.

The trial comes at a time when the bank is trying to restructure its business and shift focus away from its investment division which has been hampered by regulatory burdens and   a battle with US regulators over alleged tax evasion by some of UBS's biggest clients from the United States.

Mr Adoboli worked for Swiss investment bank UBS’s global synthetic equities division. The main part of his job was buying and selling exchange traded funds (ETF’s). These funds track different types of bonds, stocks and commodities.

Traders are supposed to secure their positions by taking up hedging positions to guard against losses. It is alleged that Mr Adoboli neglected to do this.

The Financial Services Authority (FSA) launched an investigation into why UBS took so long to discover the fraudulent trading.

Read more: Insider's view on UBS rogue trader Kweku Adoboli

The fraud led in part to the resignation of UBS’s chief executive, Oswald Grubel in September.

Mr Adoboli’s latest court appearance comes in the same week as KPMG publishes its Fraud Barometer, which shows that the level of fraud in the UK has reached an all-time high of £3.5 billion. Even if the UBS case was taken out of the figures, 2011 would still have seen the highest amount of fraud ever recorded in the UK.

KPMG’s report suggests that the pressure on individuals as a result of the financial downturn has acted as a catalyst for more fraud to be committed.

The trial will take place in September this year and is likely to be one of the highest white-collar criminal trials for years.

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