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Top 10 Rogue Traders

Fritha . . . Comments

A rogue trader is a trader who acts independently of others – and, typically, recklessly – usually to the detriment of both the clients and the institution that employs him or her. In most cases this type of trading is high risk and can create huge losses.

“Since the average dealer now sits at a desk straight out of the Space Shuttle – and in many cases is relatively inexperienced and working under considerable pressure – mistakes are inevitable.

In May last year, London’s FTSE 100 index dropped by more than 2%, after a trader typed £300m, instead of £30m, while selling a parcel of shares.

In 1998, in the biggest incident of its kind ever, a Salomon Brothers trader mistakenly sold £850m-worth of French government bonds, when he carelessly leaned on his keyboard.

And at the end of 2001, shares in Exodus, a bankrupt internet firm, jumped by 59,000% when a rogue trader accidentally bid $100 for its shares, at a time when its value was 17 cents.” (BBC)

This is a list of the top 10 rogue traders, in no particular order.

10

Jerome Kerviel
Societe Generale’s Delta One

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Rogue trader Jerome Kerviel was a quiet loner, whose disastrous deals on the European markets cost his bank a massive £3.5 billion. The more money 31-year-old Kerviel lost the more he gambled – which would have earned him the title of an incompetent mug in conventional betting circles. But this gambler’s losses were on an epic scale – dwarfing the £700 million fraud by British trader Nick Leeson, who broke Barings Bank in London in 1995.

While some branded Kerviel an idiot, one of France’s top bankers dubbed him a “genius of fraud” for the way he had managed to cover his tracks and bypass his bank’s checks. In a breathtaking understatement, one of Kerviel’s bosses at the French bank Societe Generale said he was “not one of our stars”. His huge losses on the Delta One trading desk not only cost his bank a mega-fortune, they were blamed for sending share prices crashing around the world.

Ironically, Kerviel, who earned £70,000 a year, was said to have made nothing personally from his massive scam. An insider at Societe Generale said: “What is completely unbelievable is that this person didn’t do it for his personal benefit. He didn’t get anything from it.” The glamorous world of high finance was a far cry from Kerviel’s private life, which was said to have disintegrated after his father died and his girlfriend dumped him.

9

Nick Leeson
Barings Bank

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The best-known rogue trader is Nick Leeson, who bankrupted British bank Barings in 1995. Barings collapsed after Mr Leeson, the bank’s Singapore general manager of futures trading, lost £860m – then worth $1.38bn – on Asian futures markets, wiping out the bank’s cash reserves.

The company was bought for £1 after being in business for more than 230 years. After going on the run, Mr Leeson was jailed for four years in Singapore’s Changi prison. He was released in 1999 and wrote a bestseller, Rogue Trader, now a movie starring Ewan McGregor.

Mr Leeson is now chief executive of Irish football club Galway United.


8

Toshihide Iguchi
Daiwa Bank

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The president of Japan’s Daiwa Bank received a particularly nasty shock on July 13 1995. Toshihide Iguchi, one of its senior US executives, confessed in a 30-page letter that he had lost $1.1bn through unauthorised bond trading.

Like Leeson and Rusnak, Iguchi ran up the losses over several years. Having risen from the back offices to become a trader in 1984, a lack of segregation within his division meant he could hide his losses from his superiors while he tried, and failed, to trade back to profit.

Following his confession, it emerged that he had conducted the cover-up for over a decade, falsifying some 30,000 trading slips. Having once been seen as the golden boy of the department, in 1996 he was jailed for four years and fined $2.6m.

In court, he told the judge that his life was filled with guilt, fear and deception after 11 years trying to recover his losses. Interviewed in jail, Iguchi said he had seen his earlier actions as merely a violation of internal rules. “I think all traders have a tendency to fall into the same trap. You always have a way of recovering the loss”, he told Time magazine.

Daiwa was also penalised heavily. The Federal Reserve ordered it to end all of its operations in America, leading to a sale of most of its US assets in January 2006.

7

Liu Qibing
Chinese Metals Trader

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Chinese metals trader Liu Qibing disappeared in 2005 after betting wrongly that copper prices were going to fall and amassing huge losses of 0.2bn USD.

He was thought to be a copper dealer for the Chinese State Reserve Bureau at the London Metals Exchange. However, the Chinese State Reserve Bureau denied Mr Liu’s existence – despite LME traders saying they knew him as China’s main copper trader.

6

John Rusnak
Allied Irish Bank

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In 2002, US currency trader John Rusnak was charged with covering up $691m (£474m) of trading losses so that he could boost his own earnings. He was indicted by a federal grand jury on charges of bank fraud, false entry in bank records and aiding and abetting.

The indictment followed a four-month investigation into trading at Allfirst Financial, a subsidiary of Allied Irish Bank (AIB), from 1997 to 2001. Prosecutors said the trader did not actually profit from the trading losses, mostly on the Japanese yen.

He racked up and hid losses of $691m while leading a bizarre double life. Regarded as a quiet and unassuming family man, he invented aliases and fabricated documents to cover up a growing financial hole from bad bets on currencies, particularly Japanese yen.

The FBI described the case as “the largest bank fraud in the US in the last decade.”

5

Yasuo Hamanaka
Suitomo

 69960 Copy Of Yasuo Hamanaka

Less well-known, but financially large was the £1.3bn blown away by Yasuo Hamanaka, a metals trader at Japanese conglomerate Sumitomo. Mr Hamanaka, known as Mr Five Per Cent on account of his share of the world copper market, was jailed for eight years in 1996 after admitting to a 10-year career of unauthorised dealing. He had forged the signatures of two of his superiors in letters written to foreign dealers.


4

Peter Young
Morgan Grenfell

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Peter Young was a fund manager at City bank Morgan Grenfell, which was later acquired by Deutsche Bank. In 1996, Mr Young was revealed to have bilked £220m from the funds he ran, thanks to a series of unauthorised investments he concealed.

The case returned to the headlines when Mr Young appeared at City of London Magistrates’ Court wearing a woman’s jumper and dress – and was eventually found unfit to stand trial.

3

Brian Hunter
Amaranth Advisors

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Brian Hunter was a Canadian based natural gas trader for the now closed Amaranth Advisors hedge fund. Amaranth, which had over $9 billion in assets, collapsed in 2006 after Hunter’s gamble on natural gas futures market went bad.

Amaranth and Hunter have been accused by the Commodity Futures Trading Commission of conspiring to manipulate natural gas prices.


2

The “Fat-Fingered” Mizuho Trader

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A Mizuho Securities trader sold 610,000 shares in job recruiting company J-Com Co. for 1 yen apiece, instead of an intended sale of 1 share at 610,000 yen. Mizuho said it was unable to cancel the order, causing it to lose about $340 million. The mistake was attributed to the “fat-finger” syndrome, shorthand for gaffes made when traders hit the wrong button on a keyboard and lose a bundle.

The Tokyo stock exchange later acknowledged that a glitch in its system made it impossible to cancel the trade. Mizuho and the exchange have discussed sharing some of the losses, but have so far failed to reach an agreement.

1

The Hunt Brothers

Silver Coins

Nelson Bunker Hunt and William Herbert Hunt bought more than 100 million ounces of silver bullion in 1979 and 1980, causing silver prices to soar to a record of more than $50 an ounce before a sharp plunge.

After the crash, the brothers were left with silver obligations of $1.75 billion and a silver hoard of 59 million ounces valued then at $1.2 billion, indicating a loss of $550 million. The Hunts, whose fortune was once estimated at $6 billion, filed for bankruptcy protection in 1988.

Bonus

Gordon Brown
Prime Minister of the United Kingdom

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While Brown is not a rogue trader, his catastrophic blunder in sales of gold earns him a mention here. While acting as the Chancellor of the Exchequer in the United Kingdom, Between 1999 and 2002, Brown sold 60% of the UK’s gold reserves at $275 an ounce. It was later attacked as a “disastrous foray into international asset management” as he had sold at close to a 20-year low. He pressured the IMF to do the same, but it resisted. The gold sales have earned him the pejorative nickname ‘Golden Brown’, after the song by The Stranglers. Since then the price of Gold has almost trebled, meaning the decision cost the taxpayer an estimated £2 billion. Several Asian countries including China are named by an insider as having bought the gold “on the cheap” from the Treasury. The Chinese may have made more than £1 billion from Brown’s botched sell-off. [Source]

Contributor: Fritha



  • sonia

    good list! i know about that irish bank dude. he was all over the news here in ireland!!!

  • JwJwBean

    This is the first list I was not able to understand. I know nothing about stocks.

  • bucslim

    What about Mortimer and Randall Duke? They tried to corner the market on frozen concentrated orange juice.

  • Cat Skyfire

    The Dukes were fictional. Their best counterpart here are the Hunts, who tried to corner the market on Silver. It still didn’t work.

  • SlickWilly

    Intriguing list (I certainly couldn’t have put it together; and make no mistake, it *is* well put-together) but it feels like contributors are scraping the bottom of the barrel for list ideas. I need to get cracking on that short-story writers list I was talking about…though it seems like something of that nature has already been done…

  • gravy

    yah, I have no clue what I just read.

  • islanderbst

    I say we go to clam shells as currency.

  • Harsha

    LOL!! I liked the bonus even though it was not exactly rogue trading!

  • Bass

    Even after reading the description 3 times over, I still have no clue…

  • Ginger Lee

    I’d still rather Brown for a leader than Bush. I like his housing project plans.

  • Jmurf

    Hamsandwich

  • kiwiboi

    “I’d still rather Brown for a leader than Bush. I like his housing project plans.”

    Really ? You might also get a kick out of his proposals to drive a bulldozer through our civil liberties (those that are left).

    And his handling of Britain’s gold reserves – in the face of expert advice at the time which strongly advised against it – is further illustration of what a loser/buffoon he is.

    Be thankful you have the US Constitution to protect you against Bush’s excesses.

  • kiwiboi

    I’ve spent virtually all of my working life in or around bank dealing rooms, having variously been both a trader and a risk-manager/controller. I can confidently state that behind every rogue trader you will find inadequate controls, more often than not accompanied by incompetent management.

    I have not an ounce of tolerance for dishonest traders – in the more serious cases the consequences of their actions (colleagues losing their jobs / Joe Public losing their pensions etc) can be tragic.

  • Ginger Lee

    kiwiboi- this is a never ending debate on who has the worst leader.
    But I have two words for you “Patriot Act.”

  • Funny how they are only considered ‘Rogue’ when they loose money, not while they make it.

    I believe the Hunt Bros came awfully close to cornering the market…then they could have got whatever they asked

  • kiwiboi

    Ginger Lee – heh..you’ve been reading my earlier posts on another topic ? I made exactly the same point (Patriot Act) to one of your compatriots (I’m guessing you are American) when referring to GWB.

    Actually, I do concede that Brown is preferable to Bush. Although Brown is, IMHO, an asshat and a buffoon…Bush is a whole ‘nother kettle of fish. And, paraphrasing my earlier comments, I shudder how things might have been had the US not had a Constitution to temper Bush’s actions.

  • kiwiboi

    Grant – “Funny how they are only considered ‘Rogue’ when they loose money, not while they make it.”

    Not at all. I have seen traders fired for circumventing controls even when they were making a profit. Any responsible institution would do the same.

    But you are correct in that it is hard to come up with a well-known example of this. Besides, as a dishonest trader has a natural tendency not to admit to his actions even when on a profit…time goes by, luck runs out, and suddenly they are on a big loss. A typical story..there are aspects of this in both the Nick Leeson and Jerome Kerveil fiascos.

  • Ginger Lee

    kiwiboi- I didn’t read your previous comments, but 90% of political leaders are asshats. I guess the next elections for both countries will say how the next couple of decades are going to be.

    I actually considered moving to the UK a few years ago then I got so pissed off w/ Blair I realized it doesn’t matter where you are unless you’re a-rich or b- the front man of a rich man.

  • kiwiboi

    Ginger – I don’t like to be too critical of the UK; after all, I’ve been here for a long time and it’s a great place to live and work. What never ceases to amaze me, though, is the general attitude of much of the public to the Labour Govt’s persistent attempts to erode civil liberties (ie. “if you’ve got nothing to hide you’ve got nothing to fear…”.

    My own attitude is that my only compulsory interaction with government need merely be with the Inland Revenue and, if I break the law, the police. Other than that, why do they need me to have a biometric ID card/passport, and why do they need to watch my every move on CCTV, and why do they want to bring in laws that allow the authorities to hold me without charge for 42 days (they tried, and failed, to get 90 days) etc. etc.

    ..all in the name of “terrorism” of course.

  • kiwiboi

    oh, and I didn’t even mention that they want to hold my DNA on a national DNA database…

  • Csimmons

    Nice list, really interesting.

  • Ginger Lee

    The only thing to fear is fear itself.

  • Csimmons

    I’d also have Brown as the president, atleast he’d have some smarts in how to spend money, okay maybe not :)

  • Csimmons

    ginger: and michael jackson(don’t let your kids turn their back on him)

  • Nelia

    What a random list – but I disagree with SlickWilly. I think having unusual lists like this means we are actually learning something from the lists, not scraping the barrel :)
    Fascinating stuff. Scary what a few key strokes can do! My dad works with a lot of hedge fund guys, and many of them are very strange people – crazy geniuses if you will. I’ve met one of them several times, and he has a ragingly hot wife, a life anyone would dream of… And he is completely socially inept. Awkward and (unintentionally i think) rude. But he put himself through college counting cards in casinos without getting caught, and apparently he is just insanely good with money.

  • How very white collar of you, Jamie. Trying to tell us something about you future investment plans?

  • Crimanon: maybe… shhhhh :)

  • 10% and your secret is safe. Mwahahahahaha!

  • Mikerodz

    Another feather in the hat of ListVerse. Salute.

  • CK

    Interesting list.. but so random!

  • Mikerodz: Yeah, Jamies Pimp hat.

  • Mikerodz

    Crimanon: Sssssshhhhhh

  • Mikerodz: When I get my cut, I will.

  • bucslim

    Why don’t we just name the next 20 lists, “George W. Bush is a fucking asshole” and be done with it.

    Jeez, does every list have to have some comment about Bush?

  • stevenh

    Interesting list. Thanks.

    Truth is that most rogue traders are caught early and simply escorted out the door.
    We had one at a firm I know of that was caught because he got a bit to greedy. He allocated loosing trades (not big bucks) to clients and kept some of the cream (good trades) for himself. Nothing big but it added up. When his annual percentage return passed 4 digits (over 1000%) it triggered an overflow in a computer system. Game’s up.

    Jamie:
    A funny thing about this list – I work at a securities firm and for the first time listverse.com was blocked for ‘inappropriate content’ – perhaps the security geeks felt that this page was too educational. ;)

  • Good list! (even though I didn’t feel like reading it all! lol)

  • souxieq

    stevenh: that’s funny as hell.

    Great list! I like the fact that it’s random, and I learned something from it as well. Lovely!

  • Late O’Day

    Congratulations. My first thought when I saw the topic was the Hunt Brother episode, but then I thought” “Nawww … it’s been too long. No one remember.” I’m glad to be proven wrong here.

  • DiscHuker

    bucslim: even though you got shot down immediately, i thought your comment about the dukes was brilliant.

    Boo-boo yah, boo-boo yah, boo-boo yah, hah!

  • stormy617

    Ok what I know about this kind of thing could probably fit on this . but would #2 really be considered *rogue* when it was done by mistake?

  • J. Coustark.

    Good list. Well put together, makes interesting reading.

    Well done Fritha.

  • Bucslim: #24 and people wonder why this gets confused with an american site.

  • Jono

    I’m sure all the kiwis have seen what whole companies can do with the recent news coverage of Blue Chip.
    Although, that wasn’t really stocks. It was investment property. But it’s still pretty similar.

  • bucslim

    Disc – I sorta already knew the Dukes were fictional. Besides, I think Winthorpe and Valentine have taken over. (snicker, snicker)

    Crimanon – List One: Your View: Post nasal drip – Friend or foe?

    Comment # 1 through 5 million: BUSH IS A WAR CRIMINAL!!!

    List Two: Top Ten Recipes Using Cool Whip

    Comment # 1: BUSH IS A DEMON STRAIGHT FROM HELL!!

    List Three: Top Ten Bubblegum Hits of the 60’s

    Comment# 1: BUSH STOLE MY WIFE, BURNED MY HOUSE DOWN, GAVE ME JOCK ITCH AND STABBED MY CHILDREN’S EYES OUT.

    (More comments follow until the website burns down, which was probably Bush’s fault.)

  • bucslim

    Oh and Disc, I think it’s Randolph, not Randall, you know like Randy Jackson from the Jackson 5!!! Sorry about the confusion.

  • Ginger Lee

    bucsilm: It was an easy comparison for me as he is the current leader for the US where I happen to live and fresh in many minds. Would you have rather I’d said “I’m glad I lived under Clinton for eight years? He was a good spender” Or “jeez Brown seems to have spent money better than Reagan.” It wouldn’t have made sense.

  • DiscHuker

    i wonder if your first name is mortimer then you have to be an old, rich, white guy with a stick up your ass?

  • bucslim

    LOL Disc!

  • bucslim

    Is someone using my name?

  • bucslim

    # 49 comment was not the real bucslim but by an imposter. Accept only the real bucslim comments and never fall for the fakes.

  • Mom424

    Great list! Amazing how people can lose more money in one or two years than me and my entire family will earn in a lifetime.

    Bucslim; I watched the NOVA or FRONTLINE episode last night on the road to war, Now I think Bush/Cheny/Rumsfeld are evil. I actually have pity for Colin Powell and Condi Rice. And their lawyer from the justice department (Yu?) that gave them legal justification to do what they want including war and torture should be either disbarred or shot.

  • kiwiboi

    “Jeez, does every list have to have some comment about Bush?”

    Bucslim – I understand where you are coming from, but in this case the list explicitly mentioned incompetence on the part of the British Prime Minister; a follow up comment about Bush was inevitable, don’t you think ?

  • Mom424

    Bucslim, Kiwiboi; I didn’t start it, I would have waited for the next politics list, but the documentary was sooo good. Everyone of voting age in the USA should be tied down and forced to watch it.

  • bucslim

    Mom – I should be disbarred, tied down and shot. I’ll pay extra.

    kiwi – your mom was prime minister, nudge nudge, wink wink, a nudge is as good as a wink to a blind bat

    (the preceding was an official post from the authentic bucslim, not the people who keep using his name in vain)

  • Licurgo

    this list is hilarious,most of all the fat finger thing lol

  • kiwiboi

    “kiwi – your mom was prime minister”

    Bucslim – and your sister was a (Bill) Clinton “aide” ;)

  • bucslim

    Kiwi – your sister was paid to go out with a New York Governor

  • kiwiboi

    Bucslim – your brother stayed at Neverland ;)
    Twice !!

  • otay

    Sooooooo, Bush was a rogue trader??? It gets really annoying when people don’t stick to the topic at hand!!!

  • bucslim

    kiwi – It’s not true that my brother’s stayed overnight at your house!

  • I’m afraid this one went a bit over my head, but no matter, was still nice to read! (That dude with the make up was kind of scary though!) It’s cool that ListVerse has a wide variety of topics, even if they don’t all appeal to me.

    Bucslim: “Top 20 Recipes Using Cool Whip” sounds like a good list to me!

    To the Anti-Bush Crowd: Why hate Bush? To hate shows that you still care. I choose the path of indifference. :) Furthermore, why bring it up on lists that have little, if anything to do with him? I have noticed that quite a bit myself. Weird.

    (Though I’m still thinking I might count the days until Election Day and when he’s out of office. You know, for something to do.)

  • Alex

    Bucslim = Ignorant and immature.

  • meh

    I have a friend who trades commodities. His company had tried to corner the market on Macadamia nuts. I have no idea if it went well or not. But I found it amusing at the time. Very Mortimer and Randall Duke ish. It’s all greed if you ask me. Why can’t we all just get along? This kinda stuff will be the down fall of the human race. Utopian Star Trek like existence can’t happen for this very reason. We’re too busy screwing each other for a buck that we can’t even begin to associate with other planetary species. And people wonder why “they” won’t tell us about aliens. Here is your answer.

  • nippy143

    i like this list..very helpful for my students..started reading listverse since January. Got hooked eversince…

  • Drogo

    Then there’s that evil, wicked, rogue trader Martha Stewart. She even went to prison for it…. Well, actually she was just rogue-ish.

  • Drogo: Perspective; If you worked at Wal-mart and you knew there was going to be a sale the next day on items that you knew your friends would use (bathing suits, Jeans, Clay pigeons) wouldn’t you tell them?

  • Drogo

    I meant that as a little bit of levity. I think she got screwed because she’s (somewhat) a celebrity.

  • I think she got sloppy. I thought the whole situation was… stupid, for lack of another word. There was so much more going on. Just in America. http://www.infoplease.com/ipa/A0922747.html

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  • kipples

    Nick Leeson used to live around the corner from me in my estate in Galway. I remember one night Rogue Trader was on T.V. and it was just so weird knowing i was watching a film based on 1 of my neighbors being played by my favorite actor!

  • ajaxkid

    Sense of humor: “What about Mortimer and Randall Duke? They tried to corner the market on frozen concentrated orange juice.”
    NO sense of humor: “The Dukes were fictional. Their best counterpart here are the Hunts, who tried to corner the market on Silver. It still didn’t work.”
    Cheers, bucslim!

  • apmason

    To be fair to gordon brown, the taxpayers only lost on the sale if they paid more than $275 per oz. (adjusted) to begin with. The estimate of 2 billion also assumes it would have been sold at that price at the time it had trebbled. The price of gold fluxuates (obviously) and it is not considered a good investment. At the time (1999-2000 ish) it was certainly a better deal to get out and put that money in something else.

  • Mikey.L

    soz to post late but felt like adding another to the list:

    Stefan Eriksson who ran tiger electronics (who made the Gizmondo) as a front.

  • maddof

    i win ! me maddof !!

  • So much fail. It’s unsettling how much money can be lost because of a single idiot.

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