According to the landlords, contemporaries, teachers and neighbors who have lined up in front of the media in recent weeks, Kweku Adoboli was a sociable, intelligent and overwhelmingly ‘nice guy’.
The financial community in London remains awash with speculation about how that nice guy from the industrial coastal town of Tema, in Ghana, came to be in a position to lose the Swiss bank, UBS, more than $2 billion as well as its CEO.
Adoboli’s background speaks of privilege, but is unremarkable amongst his peers in the City. The 31-year-old son of a UN staffer was schooled at the fee-paying, Quaker-run Ackworth School in West Yorkshire, where he was deputy head boy.
He studied computer science and business at the University of Nottingham before joining UBS, where he worked until 3:30 in the morning on September 15, when the City of London police arrested him at the offices of UBS in Finsbury Avenue. Later that morning, UBS announced that it had made a loss of $2 billion due to “unauthorised trading”. It later revised the figure upwards to $2.3 billion.
Adoboli remains in custody in London on two charges of fraud—for the periods October 2008 to December 2010, and from January to September 2011; plus two charges of false accounting—from October 2008 to December 2009, and January 2010 to September 2011.
Facing charges, Adoboli told a court that he was “sorry beyond words” and called his vast trading losses “disastrous miscalculations”.
Those miscalculations have called into question the survival of investment banking at UBS, as the bank decides whether to cut off a division battered by poor performance and scandal. Oswald Gruebel, the bank’s CEO, resigned over the affair on September 25.
As Adoboli’s LinkedIn profile shows, he worked on the investment bank’s European equity desk in London, trading “Delta One” strategies.
“Delta One” refers to the ‘delta’—or marginal difference—between closely correlated asset classes. By buying equities and hedging using derivative products or baskets of other assets, these computer-driven strategies mop up money through the inefficiencies in the market. It is highly complex, but is also supposed to work within tightly controlled risk limits. For every position the trader takes, he or she is expected to take a counter position—or hedge—of almost equal size.
The Swiss and British authorities are now investigating how Adoboli was able to evade the systems that monitor these limits to place directional bets. The results of those probes are likely to be months away, but the investigators will no doubt have seized on Adoboli’s CV and its startling similarity to that of the last headline-grabbing rogue, the French trader, Jerome Kerviel. Kerviel cost Société Générale, the French bank, $6.6 billion in 2008.
Starting in the bank’s “middle office”—the risk management IT department—in 2000, Kerviel made the jump up to trading in 2005, also on a Delta One desk. The bank’s comprehensive “Mission Green” report into the incident charts his activity from that point. He began to take directional bets that same year, probably to cover up the fact that he had been consistently losing using conventional strategies, the report said.
Kerviel used his knowledge of the bank’s risk systems to hide the fact that his positions were not hedged, creating fictitious counter trades by buying securities with deferred start dates or with counterparties that did not require immediate confirmation. Using passwords from other SocGen employees, he was able to go back into the system and remove the trades, fooling the risk monitoring tools. It worked for more than two years and reaped a fortune.
In January 2008, though, Kerviel was found out. He had amassed directional positions in European stock indices totalling almost €50 billion ($6.6 billion). The day that the bank began to unwind these positions was “Black Monday”, January 21, when UK, European and Asian markets fell dramatically.
That he was found out in a period of acute market stress is not a coincidence. The hedge fund, Long Term Capital Management, collapsed after the Russian sovereign debt crisis in 1998. The world’s most famous rogue, Nick Leeson, whose limit-busting trades out of Asia brought down Barings Bank, was shaken out in the aftermath of the 1995 Kobe Earthquake. Both events saw highly volatile markets with large price movements.
Like Kerviel at SocGen, Adoboli began his career at UBS in the bank’s IT department, maintaining and managing those same risk systems that were supposed to keep traders in check. Whether he used that knowledge will likely be a thrust of the investigation against him.
While systems and practices differ between banks, traders often admit that limits really are flexible. There are often subtle ways for traders, with good reputations, to go around the risk management practices that, while they reduce the potential for losses, also constrain a trader’s ability to take educated punts when they have a strong conviction.
This, cynical traders say, is why rogues can get away with deceit for long periods: no-one gets fired for winning. It is only when they lose that they have to “go write the book”—that is, be escorted out of the building by security at best, or the police.
Kerviel was, according to SocGen, at it for years. Leeson began his rogue activity in 1992, initially winning big before his fortunes turned and he began to hide his losses in the now infamous account number 88888. Adoboli’s charges—for which he has not entered a plea—cover almost four years.
Traders are understandably reluctant to go on the record about their peers who ‘go rogue’, but as more than one hinted, if you are considered good enough, hard boundaries get softer. If you break the rules and lose, though, you are on your own.
From The Arab World To Africa
In this exclusive interview with FORBES AFRICA, successful Dubai-based Emirati businesswoman, author and artist, Sheikha Hend Faisal Al Qassimi, shares some interesting insights on fashion, the future, and feminism in a shared world.
Sheikha Hend Faisal Al Qassimi wears many hats, as an artist, architect, author, entrepreneur and philanthropist based in the United Arab Emirates (UAE). She currently serves as the CEO of Paris London New York Events & Publishing (PLNY), that includes a magazine and a fashion house.
She runs Velvet Magazine, a luxury lifestyle publication in the Gulf founded in 2010 that showcases the diversity of the region home to several nationalities from around the world.
In this recent FORBES AFRICA interview, Hend, as she would want us to call her, speaks about the future of publishing, investing in intelligent content, and learning to be a part of the disruption around you.
As an entrepreneur too and the designer behind House of Hend, a luxury ready-to-wear line that showcases exquisite abayas, evening gowns and contemporary wear, her designs have been showcased in fashion shows across the world.
The Middle East is known for retail, but not typically, as a fashion hub in the same league as Paris, New York or Milan. Yet, she has changed the narrative of fashion in the region. “I have approached the world of fashion with what the customer wants,” says Hend. In this interview, she also extols African fashion talent and dwells on her own sartorial plans for the African continent.
In September, in Downtown Dubai, she is scheduled to open The Flower Café. Also an artist using creative expression meaningfully, she says it’s important to be “a role model of realism”.
She is also the author of The Black Book of Arabia, described as a collection of true stories from the Arab community offering a real glimpse into the lives of men and women across the Gulf Cooperation Council region.
In this interview, she also expounds on her home, Sharjah, one of the seven emirates in the UAE and the region’s educational hub. “A number of successful entrepreneurs have started in this culturally-rich emirate that’s home to 30 museums,” she concludes.
Kim Kardashian West Is Worth $900 Million After Agreeing To Sell A Stake In Her Cosmetics Firm To Coty
In what will be the second major Kardashian cashout in a year, Kim Kardashian West is selling a 20% stake in her cosmetics company KKW Beauty to beauty giant Coty COTY for $200 million. The deal—announced today—values KKW Beauty at $1 billion, making Kardashian West worth about $900 million, according to Forbes’estimates.
The acquisition, which is set to close in early 2021, will leave Kardashian West the majority owner of KKW Beauty, with an estimated 72% stake in the company, which is known for its color cosmetics like contouring creams and highlighters. Forbes estimates that her mother, Kris Jenner, owns 8% of the business. (Neither Kardashian West nor Kris Jenner have responded to a request for comment about their stakes.) According to Coty, she’ll remain responsible for creative efforts while Coty will focus on expanding product development outside the realm of color cosmetics.
Earlier this year, Kardashian West’s half-sister, Kylie Jenner, also inked a big deal with Coty, when she sold it 51% of her Kylie Cosmetics at a valuation of $1.2 billion. The deal left Jenner with a net worth of just under $900 million. Both Kylie Cosmetics and KKW Beauty are among a number of brands, including Anastasia Beverly Hills, Huda Beauty and Glossier, that have received sky-high valuations thanks to their social-media-friendly marketing.
“Kim is a true modern-day global icon,” said Coty chairman and CEO Peter Harf in a statement. “This influence, combined with Coty’s leadership and deep expertise in prestige beauty will allow us to achieve the full potential of her brands.”
The deal comes just days after Seed Beauty, which develops, manufactures and ships both KKW Beauty and Kylie Cosmetics, won a temporary injunction against KKW Beauty, hoping to prevent it from sharing trade secrets with Coty, which also owns brands like CoverGirl, Sally Hansen and Rimmel. On June 19, Seed filed a lawsuit against KKW Beauty seeking protection of its trade secrets ahead of an expected deal between Coty and KKW Beauty. The temporary order, granted on June 26, lasts until August 21 and forbids KKW Beauty from disclosing details related to the Seed-KKW relationship, including “the terms of those agreements, information about license use, marketing obligations, product launch and distribution, revenue sharing, intellectual property ownership, specifications, ingredients, formulas, plans and other information about Seed products.”
Coty has struggled in recent years, with Wall Street insisting it routinely overpays for acquisitions and has failed to keep up with contemporary beauty trends. The coronavirus pandemic has also hit the 116-year-old company hard. Since the beginning of the year, Coty’s stock price has fallen nearly 60%. The company, which had $8.6 billion in revenues in the year through June 2019, now sports a $3.3 billion market capitalization. By striking deals with companies like KKW Beauty and Kylie Cosmetics, Coty is hoping to refresh its image and appeal to younger consumers.
Kardashian West founded KKW Beauty in 2017, after successfully collaborating with Kylie Cosmetics on a set of lip kits. Like her half-sister, Kardashian West first launched online only, but later moved into Ulta stores in October 2019, helping her generate estimated revenues of $100 million last year. KKW Beauty is one of several business ventures for Kardashian West: She continues to appear on her family’s reality show, Keeping Up with the Kardashians, sells her own line of shapewear called Skims and promotes her mobile game, Kim Kardashian Hollywood. Her husband, Kanye West, recently announced a deal to sell a line of his Yeezy apparel in Gap stores.
“This is fun for me. Now I’m coming up with Kimojis and the app and all these other ideas,” Kardashian West told Forbesof her various business ventures in 2016. “I don’t see myself stopping.”
Covid-19: Restaurants, Beauty Salons, Cinemas Among Businesses That Will Operate Again In South Africa As Ramaphosa Announces Eased Lockdown Restrictions
South Africa’s President Cyril Ramaphosa addressed the nation announcing that the government will further ease the country’s lockdown restrictions.
Restaurants, beauty salons, cinemas are among the businesses that will be allowed to operate again in South Africa.
The country is still on lockdown ‘Level 3’ of the government’s “risk adjusted strategy”.
President Ramaphosa also spoke on the gender based violence in the country.
“It is with the heaviest of hearts that I stand before the women and the girls of South Africa this evening to talk about another pandemic that is raging in our country. The killing of women and children by the men of our country. As a man, as a husband, and as a father to daughters, I am appalled at what is no less than a war that is being waged against the women and the children of our country,” says Ramaphosa.
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