(Bloomberg) -- John Hughes, the former senior trader on the exchange-traded funds desk at UBS AG’s global synthetic equities division, was banned from working in the U.K. finance industry over his involvement in a $2.3 billion unauthorized trading loss caused by Kweku Adoboli.
Hughes knew about and didn’t report an internal fund, dubbed an “umbrella,” that Adoboli created to help them reserve profits to cover future losses, the Financial Conduct Authority said in a statement today.
Adoboli, another former trader, is serving a seven-year sentence after he was convicted in 2012 in London for fraud. The Zurich-based bank was fined 29.7 million pounds ($50 million) in 2012 for failing to detect or prevent the trades.
Hughes “allowed the desk’s profit and loss to be misstated over an extended period,” Tracey McDermott, the FCA’s head of enforcement, said in the statement. “This failure contributed to Adoboli’s unauthorized trading continuing unchecked.”
Adoboli, who worked for UBS since leaving college, was accused of hiding the risk of his trades by booking fake hedges and storing profits in the umbrella account to cover the costs of running the bank’s ETF desk. He was found guilty of two counts of fraud for causing the loss and acquitted of four charges of false accounting.
Hughes represented himself during proceedings at the FCA, the regulator said and declined to release contact information for the former trader. Hughes cooperated with the probe, the regulator said.
Adoboli argued at trial that managers at the Swiss bank pushed him to take too many risks and that rule-breaking at the bank was rampant. While he admitted causing the loss, he said it wasn’t done dishonestly.
Hughes testified that he made trades that benefited from the internal fund, called an umbrella because it was meant to protect them on rainy days.
Hughes painted different pictures of Adoboli during the trial, at one point saying colleagues considered Adoboli a lunatic and at others saying he “loved” the former trader.
“I honestly loved him, and to a certain extent I still do,” said Hughes, who, like Adoboli, at times cried on the witness stand. In an e-mail presented as evidence at the trial, Hughes told Adoboli “I love you and loathe you in equal measure.”
At least 11 employees left the bank in the wake of the trading loss. That included former Chief Executive Officer Oswald Gruebel and the co-heads of global equities, Yassine Bouhara and Francois Gouws. Adoboli’s co-workers on the ETF desk -- Hughes, Simon Taylor and Christophe Bertrand -- all also left the bank, as did his former managers, Ron Greenidge and John DiBacco.