Friday 24 November 2017

Rogue element -- traders who lost the banks billions

John Fahey

Nick Leeson hit the headlines in 1995 when he single-handedly destroyed the 233-year-old Barings Bank, which proudly counted Queen Elizabeth as a client.

Leeson's early career was a success, he quickly made an impression and was promoted to the trading floor.

He was appointed manager of a new operation in futures markets on the Singapore Monetary Exchange (SIMEX) and was making millions for Barings by betting on the future direction of the Nikkei Index.

But things began to unravel when he started making losses and set up a secret account to hide them. The trader began taking more risks to recoup his losses but problems spiralled out of control and he fled.

He was eventually arrested in Frankfurt, Germany, where he tried to escape extradition to Singapore.

He failed and was sentenced to six and a half years in jail by a Singaporean court.

Leeson eventually wrote a book about his experiences, which became a Hollywood film starring Ewan McGregor and Anna Friel.

Last year, Societe Generale trader Jerome Kerviel was convicted of being responsible for losing the bank around €4.9bn. Kerviel also landed a book deal and, in 'Trapped in a Spiral: Memoirs of a Trader', said he believed the bank was happy with his work.

At trial, he claimed the bank knew about the risk-taking.

The bank, in turn, said Kerviel (34) made bets of up to €50bn -- more than SocGen's total market value -- on future contracts on three European equity indices, and that he falsified offsetting transactions to mask the size of his bets. Kerviel was sentenced last year to three years in prison although he remains free because he has lodged an appeal.

In 2002, John Rusnak, a currency trader at US bank Allfirst, based in Maryland and then a subsidiary of Allied Irish Bank, pleaded guilty to fraud amounting to $691m dollars (€497m). The following year he was sentenced to seven and a half years in prison after doing a deal with prosecutors.

Irish Independent

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