Simon English: Kweku Adoboli’s compulsive gambling chimed with the culture of investment banks

 

At some level a man who can gamble away $2bn – at one point his losses were closer to $12bn – must be an interesting and clever man.

On the evidence presented in court it is not obvious where Kweku Adoboli’s unusual gifts lie.

At its heart, Mr Adoboli’s scheme wasn’t much more sophisticated than flipping coins and calling “heads” every single time. As losses came in he simply doubled his bets – it is called the Martingale strategy and it is commonly used by bad gamblers across the globe.

You should at least recoup your losses, goes the theory; it can’t keep coming up “tails”. But in financial markets, it can.

The size of the fraud is such that it is tempting to think of Adoboli as a criminal mastermind, a maths genius who swaggered around town, living large and laughing at the more earnest toilers around him.

While by the end he was certainly well paid – he got a bonus of £250,000 in the year before his trades finally unravelled – as traders go he wasn’t, or at least should not have been, in the big league. His job was fairly mundane. He was supposed to manage a “flat” book, to see that the trades being placed on behalf of clients weren’t exposing his employers UBS to losses. It wasn’t particularly up to him to make money; it was his job not to lose any. At this he can be said to have failed.

“He thought he was this genius hedge-fund manager. He just let it go to his head,” said one observer.

Each time there is a rogue trading scandal outsiders ask how this sort of escapade can possibly go on undetected. While it is hard for UBS to argue that its internal controls were anything other than shoddy, bankers say that rules only work if the people in your employ are relatively normal humans.

The evidence in court made it plain that Mr Adoboli was and probably remains a compulsive, obsessive gambler. He managed to live beyond his ample means, borrowing from payday loan firms as a matter of routine, spread-betting on his own account from both home and work.

He was in personal debt to the tune of £130,000 but felt sure he would win this back.

For big City firms, the temptation to let whiz-kid traders off the leash is high. The gains can be vast, and for so long as they are winning everyone involved wants to believe in the magic and to reap the rewards. Alan Miller, a fund manager at SCM Private, said: “This case highlights the need for the City to restore trust and improve compliance and trading safeguards. There appears to be a cavalier and poorly controlled gambling culture within many investment banks.”

The victims are the bank itself, and perhaps Mr Adoboli’s colleagues, many of whom are now fighting to keep their jobs as UBS undergoes some vicious downsizing.

Across the Square Mile compliance officers and their chief executives will be examining the Adoboli scandal for lessons to learn. They’ll bring in some new rules. Have a training day. Memos will be sent. This will never happen again. Not until next time.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
SPONSORED FEATURES
Have you tried new the Independent Digital Edition apps?

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... for the fourth time

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

Singapore's hidden secret of domestic worker abuse

David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals
Showdown by Shirley Jackson: A previously unpublished short story from the queen of American Gothic

Showdown, by Shirley Jackson

A previously unpublished short story from the queen of American Gothic
10 best DSLRs

Be sharp! 10 best DSLRs

Up your photography game with a versatile, powerful machine
Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes