Nick Leeson was 22 years old when he started working at Barings Bank in 1989. This was one of the oldest banks in England, beginning in 1762.
In 1992 Nick received a promotion. He was in charge of Barings’ previously dormant seat on the Singapore International Monetary Exchange. That same year he made trades he wasn’t authorized for and made £10 million. This earned him a bonus larger than his salary. It also gave Nick a precedent and incentive to push the envelope.
He set the envelope on fire.
Barings let Nick settle his own trades. Typically this job would have been assigned to another person. This allowed him to systematically hide his trading losses. It was a short-sighted plan. He placed his losing trades into an account used for trading errors and kept quiet.
In 2 years Nick had hidden over £200 million in losses. This is an amazing amount of time to hide such a huge portion of the company’s money.
January 1995, he put the nail in the coffin. He took a short straddle position in the Singapore and Tokyo markets. This position pays off if the stock market prices stay level. The opposite happened. The 6.9 magnitude Kobe earthquake rocked Japan. Naturally, the markets took a dive. He made another risky move to try and cover this, which also failed.
Nick Leeson’s Great Escape
The next month, he allegedly left a note saying he is sorry and telling his boss he was sick. Then he fled through a few countries until his capture in Germany. He was given 6.5 years in a Singapore jail for his crimes.
In total, Nick had lost over $1 billion in US dollars. This was double the capital that the bank had for trading. This took down Barings Bank after over 200 years of operation.
This story turned into a movie starring Ewan McGregor and Anna Friel, named Rogue Trader. A rogue trader is someone who trades for a company and places unauthorized trades — certainly a good name for Nick Leeson, one of the most famous rogue traders ever.
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