In June 2009, a broker named Stephen Perkins was called at 7:45AM by a clerk at the firm he worked for, PVM Oil Futures. The clerk wanted to know why Stephen had bought 7 million barrels of crude oil during the night.
Apparently, he had traded just over half a billion dollars, yet he could not remember. He told his firm that he had been trading at a client’s side in the night, but this was a lie. They wanted to speak with this customer, and the lie quickly fell apart.
In reality, Stephen Perkins drank so heavily at a PVM golf event that he blacked out by late night. During this blackout, he must have been very confident about his trading abilities. He had actually figured out what he had done just before the call from PVM. Now he was trying to figure out what to do about it.
There was nothing he could do.
Consequences of the Trade
The aftermath of this was substantial. PVM itself had to back itself out of this huge position. This caused them a loss of nearly $10 million. Compare that to PVM’s typical yearly profit of $12 million from Oil Futures.
It was not only a major event for PVM but the whole world. In his stupor, Stephen Perkins’s trading had actually raised the world price of oil. It went to a new eight-month high, with a jump of over $1.50 due to his drunken rampage.
In addition, Stephen Perkins himself received a fine of £72,000 from the Financial Services Authority. It was going to be double that, but the FSA reduced it because it might have created financial hardship for Perkins.
The most absurd part of this situation is that Perkins wasn’t even meant to invest PVM’s money, but only clients’ money.
Stephen Perkins’ Career After PVM
So Stephen Perkins was dismantled by this mistake, right? Well, not entirely. Within a year, the Swiss firm Starsupply Renewables in the same industry hired him. The demand for high level traders was so strong that even one of the largest mistakes in history did not sink Perkins’ career.
Traders, take a note from Stephen Perkins. Don’t drink too much at the work party. If you ignore this advice, put the laptop away and go to bed. That way, your only problem will be a hangover.