[ by Melanie Gretchen ]

Kweku Adoboli the former UBS trader who lost $2.3 billion, was found guilty on Tuesday by a South London jury that had deliberated for 5 days, following 8 weeks of courtroom testimony.  Mr. Adoboli received a 7-year prison sentence for fraud.  He was found not guilty on 4 counts of false accounting.  No indication has been made as to whether he intends to appeal.

Mr. Adoboli, 32, was arrested on 9/15/11 at the London offices of UBS after having confessed that he faked trades for years.  He was accused of circumventing UBS risk controls and hiding losses by booking fake trades.  Much debate has arisen as to whether Adoboli's supervisors at UBS were aware of his active trading and, so long as he was profitable, they permitted him much latitude. 

[C-I Note:  In any event, it is abundantly clear that internal controls and supervisory procedures were deficient at the bank's trading desk.  This led to much upheaval in UBS's executive offices.]

Since then, CEO Oswald Grübel resigned, as did the the co-chiefs of global equities, while the bank overhauled its risk controls.

Adoboli Defense.   Mr. Adoboli argued that his colleagues knew about his efforts to generate profit for the bank.   The prosecution successfully countered by describing the former trader as "arrogant" and a "gambler" who sidestepped rules when it suited him.  Following the verdict, Andrew Penhale, deputy head of fraud at the Crown Prosecution Service, had this to say: 

"Behind all the technical financial jargon in this case, the question for the jury was whether Kweku Adoboli had acted dishonesty, in causing a loss to the bank of $2.3 billion.  He did so, by breaking the rules, covering up and lying.  In any business context, his actions amounted to fraud, pure and simple."

Mr. Adoboli, was born in Ghana, joined the bank in 2003 as a trainee following his graduation from Nottingham University in England.  In 2006, he landed on the exchange-traded funds (ETFs) and Delta One trading desk, a plain vanilla version of derivatives trading.  He had a successful run until the summer of 2011, when he bet on the wrong side of the markets.  At one point, he had exposed UBS to potential losses of as much as $12 billion, according to evidence provided by the bank's COO of securities.

For further details, go to [Dealbook, 11/20/12].