Rogue trader scandals: roll-call of shame
With the arrest of UBS’s Kweku Adoboli on a charge involving $2 billion of losses accumulated from unauthorized trades, Euromoney takes a quick look at some of the largest rogue trader scandals to hit the headlines.
Kweku Adoboli, UBS
$2 billion 2011
Adoboli was arrested on Thursday September 15 on suspicion of a $2 billion loss that was accumulated from unauthorized trades on UBS’s Delta One derivatives desk. UBS was forced to release a statement revealing that its current estimate of the loss on the trades would be about $2 billion and that while the matter was still being investigated, it could lead the bank to report a loss for the third quarter this year. It also said no client positions had been affected.
Brian Hunter, Amaranth Advisors
$6.4 billion 2006
Energy trader Hunter made substantial losses on poor bets on the price of natural gas, which led to the collapse of the hedge fund group in September 2006. In 2007, the Commodity Futures Trading Commission (CFTC), which regulates trading in commodity futures and options, charged Amaranth with attempting to manipulate the price of natural gas futures in February and April 2006.
Jérôme Kerviel, Société Générale
$6 billion 2006-08
In October 2010, Kerviel was convicted on all charges and given a five-year jail sentence, although two years were suspended, following €4.9 billion ($6 billion) in unauthorized trades. Kerviel, like Abodoli, was an ETF and Delta One trader and was arrested in 2008, after nearly two years of rogue trading, after an internal Société Générale investigation revealed he had a €50 billion trading position.
Yasuo Hamanaka, Sumitomo
$2.6 billion 1996
Hamanaka was sentenced to eight years’ imprisonment in 1998, but was released in 2005, after being convicted of manipulating the copper price. He was also found to have forged two of his superiors’ signatures on letters to other dealers.
Nick Leeson, Baring Brothers
$1.3 billion 1995
Leeson caused the collapse of Baring Brothers in 1995 after accumulating $1.3 billion of losses on futures and options markets in Singapore and Osaka, Japan. Dutch banking and insurance group ING subsequently bought the merchant bank for £1, while Leeson went on to write a book that largely blamed the bank’s practices that allowed him to gamble with large amounts.
Toshihide Iguchi, Daiwa Bank
$1.1 billion 1995
Iguchi accumulated a substantial number of losses on authorized bond trades in 1995, which he concealed. He was imprisoned in 1996. Iguchi, a US executive for the Japanese bank, was only uncovered as a rogue trader when he wrote a 30-page letter confessing to his crimes.