The allegations come at a time of deep turmoil in the banking sector with concerns over the exposure of the world’s banks to the escalating euro-zone debt crisis.
The City of London Police, which is in charge of law enforcement in London’s financial district, is investigating the case along with the Financial Services Authority, the Serious Fraud Office and the Crown Prosecution Service.
Adoboli, 31, has hired Kingsley Napley, the law firm that acted for Nick Leeson, an infamous rogue trader in Britain who caused the collapse of Barings Bank in the 1990s.
Originally from Ghana, Adoboli attended a private school in northern England before graduating from the University of Nottingham in 2003 with a degree in e-commerce and digital business. During his five-year career at UBS, he rose quickly from a trainee investment adviser to a director in European equity trading.
The Zurich-based bank declined to comment Friday on reports that Adoboli was fired, but on Friday the Financial Services Authority regulator changed his status to “inactive.”
The incident has evoked comparisons to the case of Jerome Kerviel, a junior trader at the French investment bank Societe Generale, whose rogue bets in 2008 stunned shareholders and resulted in losses of about $6.8 billion. Kerviel is appealing his three-year prison sentence.
Analysts said Friday that the staggering losses discovered by UBS raised questions about its risk management procedures and why bank officials were so slow to detect the fraudulent activity.
Chris Roebuck, visiting professor at Cass Business School in London, said: “Why did the systems not spot this before it got totally out of control? This is a key question the risk systems managers must answer. . . . He must have found a way around the systems to get this far into debt.”
Bailed out by the Swiss government just three years ago, UBS is struggling to recover from its exposure to toxic assets and a U.S. tax evasion controversy that resulted in hefty fines. Last month, the bank announced that it would reduce its staff of 65,000 by 3,500 over the next two years in an attempt to save $2.3 billion — roughly the same amount said to be lost by Adoboli.