Did White Folks Set Kweku Adoboli Up? How Could One Trader Possibly Lose $2 BILLION Without Anyone Knowing??

- By Bossip Staff

Kweku Adoboli is the UBS trader who was popped for losing $2 Billion of the bank’s money, and now the media is starting think that something fishy is going on over there at UBS. UBS has had problems with their reputation and losing clients over the years and he could have been an easy scapegoat.

The BBC’s business editor, Robert Peston, says UBS’s internal controls did not pick up the huge loss allegedly generated by its trader Kweku Adoboli. He says Mr Adoboli told UBS that he had engaged in unauthorised trades. The Financial Services Authority, the City regulator, is investigating why UBS did not identify the transactions.

After being alerted, UBS then examined Mr Adoboli’s trading positions and informed the Financial Services Authority and the police. Our correspondent says: “The disclosure that it was Mr Adoboli’s decision to inform his colleagues of his actions that set alarm bells ringing at UBS, rather than its own monitoring system, will add to concerns that investment banks simply aren’t capable of controlling the huge risks that their traders take.”

Kweku Adoboli, who was believed to work in the European equities division at UBS, was still being held for questioning on Friday, having been arrested by City of London police at 3:30 on Thursday morning.

More skepticism on how to comprehend a trader losing billions of dollars without anyone else knowing:

Consider: 1) you need a TREMENDOUS amount of capital at risk to lose $ 2B. 2) Trades settle with real money (or, rather, its digital equivalent) – the bank transfers this money to the counterparty. On exchange traded futures, the bank is asked for margin on a nightly basis. On OTC (over the counter) trades booked vs. clients, margin is also exchanged 3) This UBS trader was on the Delta One desk, which is what we normally think of as ETFs, although swaps often feed into this desk too. For example, if a client wants long exposure to, say, the S&P 500 index, the bank might write them a swap, and the bank would hedge by buying SPY. Now, it immediately becomes clear that a trader with back office experience might have ideas about how to “fool” the risk management systems by booking out a fake client swap against massive positional punts that he is taking. In other words, TraderX goes out and buys $ 1B in SPY, and enters a fake trade into the system that says CustomerX has entered into a swap for long exposure to the S&P 500 index. Thus, according to the risk management system, TraderX is hedged: he’s long SPY in the market, but he’s short SPY exposure to Customer X – the fake trade which doesn’t exist.

It’s not that simple, though. First of all, again, to lose $ 2B, you have to have a MONSTROUS position. You can either buy tens of billions of dollars of cash instruments (assuming a loss in the neighborhood of 10%), like ETFs, or you can lever up with futures. But again, if you’re trading futures, you get asked for margin collateral on a daily basis – it makes no sense to me. So I can see how a trader could fool a risk management system (although, still, not quite to the extent you’d need to rack up a $ 2B loss), but that’s just one part of the chain! There’s still the funding of the position that is way beyond the trader’s control, and the collection of margin from the customer.

What do you think??? Are white folks really going to allow some Ghanian to lose $2B or be able to trade a size that could result in 2B of losses??

Source 1, Source 2

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  • gina

    Oh well ACCORDING TO FAUX NEWS white folks in America are accusing President Obama of bankrupting America!


  • twoface-kareem akbar educated brother from the bank

    that whole thing smells of setup. what bank in the world go let blackman lose 2billion let alone 20 dollars…but when stuff like this go down its usually the middle to lower guys who take the fall

  • yaa

    The smile on his face says it all. He caught the error and told the bosses…..he will dp his time get out and get hired possibly somewhere in Africa maybe even Asia….he is defy the fall guy and i hope he puts UBS on full blast!!!

  • 31WizKid

    I think he knows his enemies I just pray he does not try do that honour among theives BS n go down without a fight…..

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