€1.8bn rogue trader trial: Analyst had to chase down problem transactions
AN analyst who queried deals booked by accused fraudster Kweku Adoboli thought his UBS trading desk was "very messy" but did not suspect anything illegal, a London court was told today.
Henry Chu, who repeatedly chased Adoboli in the summer of 2011 over problems with his bookings, said the first he knew of any fake trades was when Adoboli's arrest was on the news in September 2011.
Adoboli, 32, is on trial at Southwark Crown Court accused of fraud and false accounting that cost UBS €1.8bn. He has pleaded not guilty.
In 2011, Chu was part of a trade support team at UBS's London office whose job included resolving any "breaks", or discrepancies, in the bookings made by Adoboli's Exchange Traded Funds (ETFs) desk.
Testifying by video-link from Hong Kong where he now works, Chu recalled dealing with frequent back office queries over breaks traced back to trades booked by Adoboli.
"There were a lot of breaks. I thought it was just a very messy desk," he said, adding later that there could be 20 or 30 trades "missing" from the books on a given day and that this could have been due to the high volumes being traded and the time pressure on traders.
He said Adoboli had said the breaks were due to the complex way in which ETFs worked and that one way to resolve them was to change the settlement dates.
The detail is significant because the prosecution has said that one of the main ways in which Adoboli conducted his fraud was to extend settlement dates to conceal what his true trading positions were.
Defence lawyer Paul Garlick read out to Chu two transcripts of chats from July and August 2011 in which the suggestion to change a settlement date appeared to come from Chu.
"Might want to change the settlement date for now," Chu said in one chat on July 12. "Done," replied Adoboli.
Garlick put it to Chu that this showed that he knew that these trades were fictitious as, if they had been real trades, unilaterally changing the settlement dates was not possible.
Chu denied any knowledge of fictitious trades. He said that changing the settlement date was a solution to breaks that Adoboli had indicated to him several times in the past, and that was the only reason why he was suggesting it during that particular chat.
"I had no clue at all. I didn't know anything about the fake trades until everything was on the news," he said, referring to September 15, 2011, when Adoboli's losses and his arrest were first reported by media.