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“In short, the coffers were bare. When the curtain finally came down his loss was some £827m.” Leeson accumulated some decent profits initially in the secret account and so continued to enjoy a revered standing within the bank who came to rely on him to produce the required profits in order to dole out the usual year-end bonuses. A case rather of ‘he who is blind is ignorant’. Quite simply, his superiors in London didn’t give a damn how he made the profits, as long as he actually did. Greed was a common thread throughout the bank it seems. Of course, the run of profitable trading came to a juddering halt, exacerbated in large part by a stroke of very bad luck for Leeson (and the people of Kobe) when the Kobe earthquake hit. By the end of 1992 he had a loss of £2 million, but come 1994 this had ballooned to £208 million! As the losses snowballed, Leeson resorted to the usual gambler’s trick of averaging down, simply buying more and more futures in the hope the market would turn around. We’ve all been there, eh? Just not on Leeson’s scale!
On January 17, 1995, the Kobe earthquake almost liquidated him. His overnight bet against volatility simply blew up in his face and he was staring down a loss of £827m. The enormity of this must have dawned on him and he realised that the cash transfers from the London office that he had managed to explain as client positions being covered, were likely to be no more. In short, the coffers were bare. When the curtain finally came down his loss was some £827m. After an attempt to disappear and avoid the music, he was arrested in Germany and returned to Singapore where he was ultimately sentenced to six years in the notorious Changi jail. Whilst incarcerated his run of bad luck continued with his wife remarrying and him developing colon cancer. Barings Bank was brought down and finally sold for the symbolic price of one British pound.
Kweku Adoboli
Kweku Adoboli is another rogue trader who it seems made no money for himself, but was quite simply looking for the adulation and respect of his fellow traders at UBS. He did however lose money personally on his spread betting account with IG Index! Working within the Global Synthetic Equities trading team of UBS and, again, in similar echoes to Mr Leeson’s escapades, Adoboli’s role was supposed to be that of putting together “baskets” of equities in various geographic regions to capture relatively small (but frequent) discrepancies between the representative futures indices — again, a form of arbitrage.
12 | www.financial-spread-betting.com | March 2013
“in similar echoes to Mr Leeson’s escapades, Adoboli’s role was supposed to be that of putting together “baskets” of equities in various geographic regions to capture relatively small (but frequent) discrepancies ” Adoboli placed a number of unauthorised trades in the S&P 500, EuroStoxx and other main indices and eventually racked up losses of $2 billion.