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Nick Leeson
From Wikipedia, the free encyclopedia
Nicholas Leeson (English, born February 25, 1967) is a former derivatives trader whose unsupervised speculative trading caused the collapse of Barings Bank, the United Kingdom's oldest investment bank.
Leeson was born in Watford, north-west of London. He attended Parmiter's School, where teachers found him to be a poor mathematician. After leaving school, Leeson found a job at Barings in the early 1990s, with almost no financial experience; in a matter of a few years, he was appointed manager of a new operation in futures markets on the Singapore International Monetary Exchange (SIMEX).[1] From 1992, Leeson made unauthorized speculative trades that at first made large profits for his employer, accounting for 10% of Barings' annual income. His luck quickly went sour, and he used a secret account (numbered 88888 -- a number considered very lucky in Chinese numerology) to hide his losses. Leeson claims that this account was initially opened to hide a £20,000 trade of one of his subordinates that had been recorded incorrectly; however, Leeson used this account to cover future bad trades. He insists that he never used the account for his own gain, but lawyers for Barings located approximately 35 million dollars in various bank accounts tied to him.[1] Management at Barings Bank also allowed Leeson to remain Chief Trader while being responsible for settling his trades, jobs that are usually done by two different people. This made it much simpler for him to hide his losses from the Bank.
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By the end of 1992 the account's losses exceeded £2 million, which ballooned to £208 million by the end of 1994. The beginning of the end occurred on January 16, 1995, when Leeson placed a short straddle (an options trading strategy) in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit early in the morning on January 17, sending Asian markets, and Leeson's investments, into a tailspin. Leeson attempted to recoup his losses by making a series of increasingly risky new investments, this time betting that the Nikkei Stock Average would make a rapid recovery. But the recovery failed to materialize, and he succeeded only in digging a deeper hole. Realizing the gravity of the situation, Leeson left a note reading "I'm Sorry" and fled. Losses eventually reached £827 million ($1.4 billion at then-prevailing exchange rates), twice the bank's available trading capital. This led to the bank's collapse.
After fleeing to Malaysia, Brunei and finally Germany, Leeson was arrested and extradited back to Singapore on March 2, 1995. While he had authorization for the January 16 short straddle, he was charged with fraud for deceiving his superiors about the riskiness of his activities and the scale of his losses, although some observers (and Leeson himself) have placed much of the blame on the bank's own deficient internal auditing and risk management practices. Sentenced to six and a half years in jail in Singapore, he was released from prison in 1999, having been diagnosed with colon cancer, which he has survived despite grim forecasts at the time. While in prison, in 1996, Leeson published an autobiography, Rogue Trader, detailing his acts. A review in the financial columns of the New York Times stated that "This is a dreary book, written by a young man very taken with himself, but it ought to be read by banking managers and auditors everywhere."[1] The book was later made into a film of the same name starring Ewan McGregor and Anna Friel.
Nick Leeson now lives in Barna, County Galway in the west of Ireland. Having divorced while in prison, he has now re-married and is a regular guest on the after-dinner speaking circuit, having described himself as one of Great Britain's most sought-after speakers. [2] He was appointed Commercial Manager of Galway United Football Club in April 2005, rising to the position of General Manager in late November 2005. He still finds time to deal in the stock markets, but only with his own money [3].
On June 23, 2005, Leeson released a new book Back from the Brink: Coping with Stress. It picks up his story where Rogue Trader left off, including in-depth conversations with psychologist Ivan Tyrrell asserting how the prolonged periods of severe stress that affected Leeson's mental and physical health can be related to most people.
- Rogue Trader (1996, hardcover) ISBN 0-316-51856-5; (1997, softcover) ISBN 0-7515-1708-9
- Back from the Brink: Coping with Stress (2005) - ISBN 0-7535-1075-8
- ^ a b c Norris, Floyd. "Upper-Class Twits Made Me Do It." New York Times, 31 March 1996. Available here.
- ^ Commentary on speaking engagements - nickleeson.com
- ^ Rogue trader Leeson 'eyes deals'
- Speculation in financial markets