Leeson, Nick - The Rogue Trader, billion dollar...

Nick Leeson

THE CON: Leeson - known as the "Rogue Trader" - lost over $1 billion through speculative trading on Asian stock markets, which he covered up through secret accounts and forged documents.

THE DAMAGE: $1.38 billion

THE OUTCOME: Barings folded under $1.38 billion in debt in 1995. A Dutch firm bought the 233-year-old bank for one pound. Leeson served about four years of a 6-½ year sentence in a Singaporean jail.

The Rogue Trader

At 25, Nick Leeson was a derivatives trader for Barings, P.L.C., Britain’s oldest bank. He made millions gambling on the Singapore International Monetary Exchange; that is, until he accumulated enormous losses that he covered up in secret accounts and forged documents. By the time the rogue trader’s secrets was discovered, Barings was $1.38 billion in the hole.

Leeson traded futures for Barings on the Singapore International Monetary Exchange – gambling on the ups and downs of Japan’s Nikkei 225. At one time, his trading accounted for 10 percent of the bank’s profits, according to The Independent. Whether because of his effectiveness, or because management in London didn’t pay enough attention to derivatives trading in Asia, Leeson had an incredible opportunity to cook the books. He served both as a trader and the person who settled the trades – two positions with a distinct conflict of interest.

According to Leeson, his first mistake was to cover up losses incurred by an inexperienced co-worker. He hid the losses in “error account 88888,” which got its name from China’s lucky number. Before long, the error account had grown. As the lies piled on top of each other, Leeson got deeper into the scheme. He bet that the Japanese stock market would go up; then an earthquake in Kobe, Japan changed the picture. Desperate to pay off his debt, Leeson made false statements about Barings' position on the futures market – claiming $460 million in futures contracts in order to release $115 million for more trading. He also lied to auditors and used forged documents to make it appear as if Barings had received $78 million.

When the hopelessness of his situation became apparent, Leeson wrote a short note – “I’m sorry” – and fled Singapore. Arrested within a week at the Frankfurt airport, he spent nine months in German custody before being extradited to Singapore for interrogation by the Fraud Squad. During his trial, Leeson's attorneys pushed to have the time he had spent in custody taken into consideration and emphasized that he had not personally profited from the fraud. They portrayed him as young and reckless and argued that his supervisors knew about (and ignored) the $78 million discrepancy in the records.

Barings collapsed in 1995 under the weight of the $1.38 billion debt. A Dutch banking and insurance company picked up its assets for one pound. Leeson was sentenced to 6 ½ years in a Singapore prison. He served about four years and was released shortly after being diagnosed with cancer. Leeson wrote two autobiographies, “Rogue Trader” and “On the Brink: Coping with Stress.” A film based on his autobiography, “Rogue Trader,” was released in 1999.

Today, he earns a living through speaking engagements and as the CEO of the Irish football team, Galway United.