January 23 2020

One of the saddest aspects of the One Coin scam perpetrated by the now missing Dr Ruja Ignatova is how unsophisticated (and, indeed, poor) savers in African countries were specifically targeted using the claim that this wonderful new cryptocurrency technology would bring easy finance (and all its many advantages) to the unbanked. OneCoin was presented as practically a social service and a revolution in finance which would transform the prospects of those whom traditional finance providers had ignored.

All too good to be true?

Of course. And what this meant in practice for those believing these claims can be heard here in the BBC’s radio documentary – The Missing Cryptoqueen. What it also meant for those involved in handling the money she made was rather more traditional – convictions for fraud and money-laundering.

Investors believed what they hoped was true and failed to ask some basic and obvious questions. If there was no blockchain how could this new currency really be a cryptocurrency? And what was the track record of the person behind it? If they had, they might have learnt that there was no blockchain and that Dr Ignatova had form, having received in 2016 a suspended sentence and fine from a German court for her role in relation to a German metallurgical factory taken over by her, asset stripped and then left to go bankrupt in 2009.

Past performance can sometimes be a guide to the future, it seems.

So what might an investor make of an opportunity to invest in a new venture which will:-

• Package new and existing mortgages into securities to be sold to investors
• The mortgages to be sold to people who have a low uptake of these products, preferring to use their savings to buy land and build property
• In a country – Ghana – with high interest rates and a very recent banking crisis, which resulted in 7 Ghanaian banks collapsing
• On the basis of a study, whose authors have not been revealed, which apparently states that there are plenty of people able to afford a $50,000 mortgage among the 9 million Ghanaians earning more than $11 a day (a munificent annual income of $4,015)
• Promoted by a convicted fraudster (responsible for the UK’s biggest fraud). Yes, Kweku Adoboli is back (though this time it is the economy of Ghana he plans to grow and the balance sheets of (presumably) the remaining Ghanaian banks he wants to expand)
• Who declines to say who his business partners are
• But expects banks to be shareholders in the new venture (assuming actual and potential conflicts of interest can be properly managed)
• And who is still being economical with the actualité of the reasons why he was convicted and imprisoned.

But it is good to see that he has developed a sense of humour – if this quote is genuine: “The day when I deliver my first profit to someone, that will be a good day.”

The injunction “Let the buyer beware” is as sound as ever.

November 14 2018

2,185 days after he was convicted of two counts of fraud by abuse of position at Southwark Crown Court on 20th November 2012 after a 10-week trial, and despite a shamelessly self-pitying and self-justifying campaign to avoid the consequences of his actions, Adoboli has finally been deported to his home country, Ghana.

The wheels of British justice grind exceedingly slow but they do – eventually – get there.

Let’s put those 2,185 days into a bit of perspective.

• Amount of money lost by his fraudulent trading: US$2,500,000,000.  (If the sums spent by UBS on remediation and dealing with the consequences of this loss were added in, the totals would be truly eye-watering.)
• Days spent on remand before his trial: 267
• Days spent by my team and others working on the investigation: 438
• Sentence: 7 years or 2,556 days
• Time actually spent in prison following his sentence: 946

As the City of London Police said following his conviction: “This was the UK’s biggest fraud, committed by one of the most sophisticated fraudsters the City of London Police has ever come across.”  The trial judge, Mr Justice Keith, admirably summed up his character when he described him as a gambler, arrogant and in denial and said that he was: “profoundly unselfconscious” of his own failings.

But despite his masterly conduct of the trial, Mr Justice Keith did not explain in his sentencing remarks why what Adoboli did was so wrong, why fraud – of any type – is so damaging and this lacuna is perhaps symptomatic of our failure to take fraud as seriously as we should, as some other countries do.  After all, if the UK’s biggest fraud does not result in the maximum sentence, what will?

Fraud is too often seen as a victimless or somewhat technical crime or, perhaps more accurately, the victims, especially institutions, are seen as unsympathetic and partly responsible for their plight.  After all, who cares if an arrogant bank loses some money.  They are not like some naive widow conned out of her life savings.  Who gets hurt, really?

But the damage that fraud does is not the loss of money, bad as that can be.  Nor is it even the damage to reputation – and that can be very bad indeed and much more long-lasting than most think.

Fraud is damaging because it is so corrosive of the trust that is the essence of banking, that is – or should be – at the heart of any working environment, at the heart of any good relationship with colleagues, bosses, clients, the public, at the heart of any well-functioning community.  Fraud breaks those bonds of trust.  When someone is trusted and they let you down by lying, by cheating, by taking advantage, by behaving like Adoboli did, like many other fraudsters have done, real people are hurt.  Worse – the very idea of having confidence – in the institution, in your colleagues, in banking as a dependable underpinning of our society – is damaged and takes time to rebuild.  A fraudster does not just destroy their own reputation.  Their actions chip away at the reputation of everyone else in their sector.  And they make it just that bit harder for those people – however good, however hard-working, however trustworthy – to be trusted by others, by the public.

That is the real harm that fraud does.  We would do well to take it more seriously than we do.

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