News & Info

Billions Lost On These Trading Blunders
25 Sep, 2019
Japanese trading giant Mitsubishi said last week it booked a US$320 million loss after an unnamed rogue trader made unauthorized loss-making oil derivatives trades and allegedly manipulated the risk management system to disguise his actions.

Last week’s viral story about the trading bust at a Mitsubishi subsidiary joins two long lists in the financial and oil trading history: the gallery of the rogue traders and the hall of infamous oil trades gone very, very wrong that cost financial institutions millions and/or billions of U.S. dollars and reputational damage.

The still unnamed trader at Mitsubishi’s subsidiary Petro-Diamond Singapore (Pte) Ltd now joins the gallery of infamous rogue traders Nick Leeson, Jerome Kerviel, and Bruno Iksil in the list of traders who have incurred massive losses to the financial institutions they had worked for because they had made unauthorized derivatives trades.

Without authorization, the trader at Petro-Diamond Singapore had taken derivatives positions on oil since the beginning of the year. But after oil prices started to slide at the beginning of the summer, he incurred hefty losses, costing the company US$320 million in oil bets gone wrong.

The trader wasn’t the first ‘rogue one’, nor will he be the last.

One of the most striking events involving a rogue trader took place in 1995. Back then, Nick Leeson was found to have kept secret files on rogue stock futures trades that cost Barings Bank the current equivalent of US$1 billion (827 million British pounds). Leeson’s trades in Singapore led to the collapse of London’s oldest merchant bank and the banker to the Queen. Leeson served time for his unauthorized trades.

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