We all make mistakes, but ours do not cost as much as these guys’:
As a bond trader for Daiwa Bank’s New York office, Iguchi lost the bank $1.1 billion over 12 years from 1983 and 1995. His trades were consistently making losses, but rather than own up to his mistakes, he sold off the bank’s assets worth $733 million and customers’ securities worth $377 million.
These illegal trades were done in an attempt to recover the lost money from his investments.
Working as a trader for Barings Bank since 1989, he initially made good profits, but then his luck turned and he started making losses. Instead of reporting them, he hid the losses, which accumulated to £208 by 1994. The largest losses came in 1995 when the Kobe earthquake hit Japan while he was holding large positions.
These led to huge losses, which Leeson tried to recover by making more trades. Eventually, he lost Barings $1.4 billion and the bank was declared insolvent.
The Blue Whale debacle
JP Morgan Chase bank was heavily shorting a credit default swap (CDS) based on the CDX index which tracks default risk of major US companies in 2011. In 2012, another trader within the bank was shorting interest rate swaps between several companies and the LIBOR rate.
When the European financial crisis occurred, LIBOR rates were dropped and the swaps caused major losses. Together, the losing trades costed JP Morgan $6.2 billion, while some believe the losses may be much higher.
UBS rogue trader scandal
As a trader at UBS, Kweku Adoboli used the bank’s capital to make very risky trades, even exceeding the daily trading limit given to traders. To hide his activities, he reported different information to the company, and even used his own money. By the time he was discovered in 2011, UBS had lost $2 billion.
Societe Generale almost cripples European markets
The culprit, Jerome Kerviel, was a junior trader at Societe Generale, one of Europe’s biggest banks and was in charge of arbitrage. In 2007, he had engaged in risky trades which made the bank $2 billion, but he was afraid of losing his job from the unauthorized trades, so he sought to make some losses in 2008.
He was long on stock futures even as the credit default crisis was unfolding, to the tune of $73 billion which was more than the bank’s market capitalization. As the bank unwounded these trades, it lost $7.2 billion due to the lower prices.
Allied Irish Bank Forex loss
John Rusnak was in charge of Forex trading at the Allied Irish Bank, but he made huge losses which he hid by creating a false identity and making false trades.
His actions were discovered in 2002 during a routine check which found Rusnak had gone long on the Japanese yen by $7.5 billion against the US dollar. The total losses hid from the bank were worth almost $700 million.
The copper king
Through Sumitomo Corporation, Yasuo Hamanaka controlled 5% of the world’s copper supply in physical warehouses. He made a lot money by going long and cornering the market, but when copper supply increased when new mines were discovered in China, prices dropped.
Check more about copper and other forex trading instruments on topbrokers – portal about top forex brokers and their services. His net long positions cost the company more than $1.8 billion, with prospected losses going as high as $5 billion.
$6.6 billion heat wave
Brian Hunter was the head of Amaranth hedge fund energy desk, and he had gone long on natural gas futures in 2006 believing the winter would cause prices to go up. Instead, a heat wave head, driving down demand and price, causing the long positions to lose money. The hedge fund lost $6.6 billion and was dissolved after the loss.
Holding on to losers
Running the Global Proprietary Credit Group (GPCG) under Morgan Stanley, Howie Hubler had sold CDOs with a triple-A rating worth $16 billion. When these CDOs were discovered to be worthless, Hubler refused to close the positions, which led to a total loss of $9 billion.
The most expensive lunch… almost
After a very long lunch and in a drunken haze, David Redmond made trades on oil worth $10 million before close of business. It isn’t as much as the other billion-dollar traders, but it’s just very interesting.
The following day, he closed the positions and hid the records, but he was still discovered and dismissed from Morgan Stanley. In this case, there were no losses incurred, but the trader had risked $10 million of the bank while drunk, which goes to show how careful traders ought to be.