Rogue Traders in Our Midst

Trading is one of the most coveted profession in the financial world. A good trader can make millions, or even billions, of dollars for his company every year and take home vast bonuses and perks. However, traders have to crunch numbers and digest accurate information everyday. And it is, indeed, among the most stressful job. One wrong move and a company's profits can be wiped out, a reputation destroyed, and a profession ruined.

Recently, we heard of another gargantuan trading loss in the futures transactions of Societe Generale. The involved amount reached over US$7-billion, even larger than the loss incurred by the more notorious Nick Leeson for Barings in 1995. But prior to that, an American dealer for the New York subsidiary of France's Credit Agricole lost 250-million euros (about US$350-million) last year by taking excessive risks without authorization.

Many Investment banking industry experts say complacency and a market culture that rewards excessive risk-taking might be the root of all these massive failures.

Although, technology does help prevent these kinds of trading failures, but it is still the trader's behaviour that counts, according to Roger Steare, professor of organizational ethics at Cass Business School.

So, without much further ado, here are some of the well-known and infamous rogue traders who have rocked the investment world during their market reign and downfall.

Jerome Kerviel, Societe Generale

He was a futures trader working for Societe Generale who had allegedly defrauded the French bank out of 4.9-billion euros (about US$7.1-billion), in what appears to be the biggest loss by a single trader in investment banking history. The trader is barely in his 30's, who have joined the bank in 2000 and earned an annual compensation of less than 100,000 euros (about US$145,000).

Societe Generale alleges that Kerviel used in-depth knowledge of the control procedures gained while working in the bank's middle office in his former job. Hence, the trader was able to conceal massive trading positions built up over 2007 and 2008 through a scheme of elaborate fictitious transactions.

Liu Qibing, Chinese Metals Trader

Regarded as China's Nick Leeson, this Chinese metals trader suddenly disappeared in 2005 after betting wrongly that copper prices were going to fall, causing him to amass huge losses. He shorted up to 220,000 tons of copper at US$3,300 per ton. However, copper price became so bullish that it even increased by 38% during the latter part of 2005.

Liu was thought to be a copper dealer for the Chinese State Reserve Bureau at the London Metals Exchange (LME), but the bureau denied his existence despite many LME traders saying they knew him as China's main copper trader.

John Rusnak, Allied Irish Bank

He was a US currency trader at Allfirst Financial, a subsidiary of Allied Irish Bank (AIB), who was charged in 2002 of bank fraud for covering up US$691-million (£474-million) of trading losses for personal gains. He was also indicted on charges of false entry in bank records, and aiding and abetting a fraud. However, the prosecutors did not actually proved that the trader had profited from the trading losses he incurred from 1997 to 2001, mostly on the Japanese yen.

Yasuo Hamanaka, Sumitomo

Less recognized, but financially a bigger loser, was this metals trader of Japanese conglomerate Sumitomo. He was also known as Mr. Five Per Cent, on account of his share of the world copper market. He had blown away £1.3-billion (about US$2.2-billion), larger than Nick Leeson's losses.

As a consequence, he was jailed for eight years in 1996 after admitting to a 10-year career of unauthorized dealing. He had forged the signatures of two of his superiors in letters written to foreign dealers.

Peter Young, Morgan Grenfell

He was a fund manager Morgan Grenfell, which is now under the management of Deutsche Bank. In 1996, Young revealed that he have bilked £220-million (about US$355-million) from the funds he managed by conducting a series of unauthorized trades.

His case became more sensationalized when one time he appeared at City of London Magistrates' Court wearing a woman's jumper and dress, and the judge was eventually found him unfit to stand trial on that day.

Nick Leeson, Barings Bank

He is so far the best-known rogue trader, who was responsible for the collapsed of the two century-old British bank Barings in 1995. Leeson was then the bank's general manager of futures trading for Singapore. His massive loss, worth around £860-million (about US$1.38-billion at that time), wiped out all the bank's cash reserves as his trades on Asian futures markets went haywire. The loss was so devastating and humiliating for Barings, which was in existent for over 230 years. It was bought for merely £1 by a leading Dutch financial services firm ING.

As a consequence of its failure, Leeson was jailed for four years in Changi prison in Singapore. He was released in 1999 and wrote a bestseller book, Rogue Trader, which was produced into a movie starring Ewan McGregor. The former rogue trader is now working as chief executive of Irish football club Galway United.