The Rogue, a seemingly timeless and ubiquitous figure – has seen many iterations – the cowboy, archeologist, space-smuggler, but seldom as a trader. Why is that? Probably because the world of financial markets is a world of rules and regulations, no place for a rogue. But they’re still out there, the loose-cannon traders that within a proverbial New York minute manage to lose millions of dollars. Gun-ho taylored-suit-wearing rebels, haphazardly investing in risky assets in the hopes of huge payoffs. Usually rogue traders will work behind the scenes making trades with impunity – until they lose…everything.
Here are eight of the most memorable traders gone rogue.
Nick Leeson
Nick Leeson is likely to be on most rogue traders list as he managed to bring down an entire bank. Barings Bank, one of the UK’s oldest merchant bank at the time, was brought down by a series of sour trades that combined reached £827 million. Leeson even managed to turn a profit while trading under Barings’ name, including 10% Barings’s net profit in ’93.[1] After serving five years he became CEO of Galway United an Irish football team.
Jerome Kerviel
Jerome Kerviel, a French trader, was arrested in the beginning of 2008 after the French authorities discovered a huge scheme at the cost of Societe Generale Bank, one of France’s biggest banks. Using arbitrage, which means Kerviel would buy and sell the same instrument on different markets, taking advantage of the price difference. The problem is that he used the bank’s assets and didn’t really tell anyone. He was sent away (to prison) for three years.[2]
Yasuo Hamanaka
Yasuo Hamanaka was a criminal polymath with skills including price-fixing, fraud and forgery. His call to glory – or more appropriately disgrace – was copper. When everything was said and done, Hamanaka cost Sumitomo Corporation, the firm he was employed by, a whopping $2.6 billion. He received eight years in 1997. His rogue trading even earned him a cool nickname – “Mr. Five Percent” – because it is said that that is how much of the global copper market he once owned.[3]
Peter Young
Peter Young is one of the rogues that story are written about (not only because I’m writing about him right now). He (kind of, you’ll see later) held on to 10% of the assets to be used for investment – while being employed by Morgan Grenfell Asset Management. Here’s where it becomes weird – he showed up to the hearing in a dress and revealed that he attempted a self-administered sex-change…he was found not guilty due to insanity. Obviously.⁴
Toshihide Iguchi
This ex-Daiwa Bank exec, unlike other self-administered sex-changers, actually confessed with an comprehensive 30-page letter. His confession admitted to bond trading without authorization, ultimately costing Daiwa Bank $1.1 billion. Iguchi managed to keep his trading up for decades, forging an admittedly impressive 30,000 trading slips. In 1996 he received a four-year prison sentence and a handsome fine of $2.6 million.[4]
Bruno Michel Iksil
Yet another rogue trader with a cool nickname or a hurtful insult depending on Bruno Michel Iksil’s body mass index – “The London Whale,” caused $4 billion worth of damage to finance giant, JPMorgan in 2012. Using credit default swaps he committed a series of derivative transactions. The investigation launched against Iksil, involved 1000 people and even got JP Morgan in trouble, due to their lacking internal control systems.⁵
Brian Hunter
Brian Hunter is credited with causing the largest hedge fund implosions in history, resulting in $6.5 billion worth of damage to his firm Amaranth Advisors in 2006. Trading on natural gas spreads over a span of several years The Federal Energy Regulatory Commission and CFTC accused Brian of conspiring to manipulate natural gas prices. The huge magnitude of his natural gas positions as part of his hedge fund, which main intent was to deliver frequent and consistent returns to his investors is that makes Brian a rogue.[5]
John Rusnak
There are a lot of stories where people disappear, there are even more stories where people disappear with money – but few people disappear with an astounding $700 million. That’s exactly what happened to John Rusnak in the beginning of 2002. When the investigators started digging they found a decade of shady trading covered up, hundreds of millions lost traded against the Japanese yen. They way he tried to cover his indiscretions was with falsified options. When everything was said and done Rusnak had surpassed his $2.5 million limit for trading a jaw-dropping 3,000 times. Was sentenced to seven years for these slight indiscretions.[6]
Keeping on the straight and narrow might not be exciting or result in mind-blowing profits, but it will keep you out of jail and will also allow you to continue working. So as all those famous shows say at the beginning “Don’t try this at home”.
[1] Jason Rodrigues (February 25, 2015). “Barings collapse at 20: How rogue trader Nick Leeson broke the bank.” The Guardian.
[2] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
[3] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
[4] Listverse (March 24, 2008). Top 10 Rogue Traders.
[5] Alanna Byrne and Daniel P. Collins (June 7, 2012). “Top 10 rogue traders plus 2.” Futures Mag.
[6] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
The Rogue, a seemingly timeless and ubiquitous figure – has seen many iterations – the cowboy, archeologist, space-smuggler, but seldom as a trader. Why is that? Probably because the world of financial markets is a world of rules and regulations, no place for a rogue. But they’re still out there, the loose-cannon traders that within a proverbial New York minute manage to lose millions of dollars. Gun-ho taylored-suit-wearing rebels, haphazardly investing in risky assets in the hopes of huge payoffs. Usually rogue traders will work behind the scenes making trades with impunity – until they lose…everything.
Here are eight of the most memorable traders gone rogue.
Nick Leeson
Nick Leeson is likely to be on most rogue traders list as he managed to bring down an entire bank. Barings Bank, one of the UK’s oldest merchant bank at the time, was brought down by a series of sour trades that combined reached £827 million. Leeson even managed to turn a profit while trading under Barings’ name, including 10% Barings’s net profit in ’93.[1] After serving five years he became CEO of Galway United an Irish football team.
Jerome Kerviel
Jerome Kerviel, a French trader, was arrested in the beginning of 2008 after the French authorities discovered a huge scheme at the cost of Societe Generale Bank, one of France’s biggest banks. Using arbitrage, which means Kerviel would buy and sell the same instrument on different markets, taking advantage of the price difference. The problem is that he used the bank’s assets and didn’t really tell anyone. He was sent away (to prison) for three years.[2]
Yasuo Hamanaka
Yasuo Hamanaka was a criminal polymath with skills including price-fixing, fraud and forgery. His call to glory – or more appropriately disgrace – was copper. When everything was said and done, Hamanaka cost Sumitomo Corporation, the firm he was employed by, a whopping $2.6 billion. He received eight years in 1997. His rogue trading even earned him a cool nickname – “Mr. Five Percent” – because it is said that that is how much of the global copper market he once owned.[3]
Peter Young
Peter Young is one of the rogues that story are written about (not only because I’m writing about him right now). He (kind of, you’ll see later) held on to 10% of the assets to be used for investment – while being employed by Morgan Grenfell Asset Management. Here’s where it becomes weird – he showed up to the hearing in a dress and revealed that he attempted a self-administered sex-change…he was found not guilty due to insanity. Obviously.⁴
Toshihide Iguchi
This ex-Daiwa Bank exec, unlike other self-administered sex-changers, actually confessed with an comprehensive 30-page letter. His confession admitted to bond trading without authorization, ultimately costing Daiwa Bank $1.1 billion. Iguchi managed to keep his trading up for decades, forging an admittedly impressive 30,000 trading slips. In 1996 he received a four-year prison sentence and a handsome fine of $2.6 million.[4]
Bruno Michel Iksil
Yet another rogue trader with a cool nickname or a hurtful insult depending on Bruno Michel Iksil’s body mass index – “The London Whale,” caused $4 billion worth of damage to finance giant, JPMorgan in 2012. Using credit default swaps he committed a series of derivative transactions. The investigation launched against Iksil, involved 1000 people and even got JP Morgan in trouble, due to their lacking internal control systems.⁵
Brian Hunter
Brian Hunter is credited with causing the largest hedge fund implosions in history, resulting in $6.5 billion worth of damage to his firm Amaranth Advisors in 2006. Trading on natural gas spreads over a span of several years The Federal Energy Regulatory Commission and CFTC accused Brian of conspiring to manipulate natural gas prices. The huge magnitude of his natural gas positions as part of his hedge fund, which main intent was to deliver frequent and consistent returns to his investors is that makes Brian a rogue.[5]
John Rusnak
There are a lot of stories where people disappear, there are even more stories where people disappear with money – but few people disappear with an astounding $700 million. That’s exactly what happened to John Rusnak in the beginning of 2002. When the investigators started digging they found a decade of shady trading covered up, hundreds of millions lost traded against the Japanese yen. They way he tried to cover his indiscretions was with falsified options. When everything was said and done Rusnak had surpassed his $2.5 million limit for trading a jaw-dropping 3,000 times. Was sentenced to seven years for these slight indiscretions.[6]
Keeping on the straight and narrow might not be exciting or result in mind-blowing profits, but it will keep you out of jail and will also allow you to continue working. So as all those famous shows say at the beginning “Don’t try this at home”.
[1] Jason Rodrigues (February 25, 2015). “Barings collapse at 20: How rogue trader Nick Leeson broke the bank.” The Guardian.
[2] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
[3] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
[4] Listverse (March 24, 2008). Top 10 Rogue Traders.
[5] Alanna Byrne and Daniel P. Collins (June 7, 2012). “Top 10 rogue traders plus 2.” Futures Mag.
[6] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.
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