23 September 2011

Another Rogue Trader

In the tradition of Jerome Kerviel, Nick Leeson, and Yasuo Hamanaka, here comes the latest rogue trader to force us to contemplate what the heck the "risk managers" at large banks actually do for a living: world, meet Kweku Adoboli. Mr Adoboli, meet world.  Oh, you two are already acquainted?

Let me backtrack and explain those other names, then. Nick Leeson was the Singapore-based derivatives broker whose trading losses of $1.4 billion caused the demise of a centuries-old bank, Barings, in 1995.  Leeson is my personal favorite member of the group, for reasons I won't try to explain.

Hamanaka was a Japanese copper trader who at one time controlled 5% of the world's copper supply. In June 1996, though, Sumitomo Corporation had to admit to a loss of $1.8 billion on Hamanaka's trades. He was sentenced to eight years in prison, served seven.

Jerome Kerviel, the biggest loser of the bunch, in the employ of giant French bank Société Générale, lost 4.9 billion euros, or roughly $7 billion in what Americans call money, in January 2008.  It was an early sign that this was going to be a very rough year.

Now we come back to Kweku Adoboli. He lost the equivalent of $2.3 billion dollars working for UBS in their London office.  But he makes an odd addition to this already-odd-enough pantheon. First, he was an ETF specialist.  ETFs are boring.  They're supposed to be boring, that is their charm.

Second, he seems to be the first rogue trader of the "social media" era. He kept a Facebook page, and as things turned against him, at a moment when he must have understood his UBS superiors were closing in, he updated his FB status to read, "I need a miracle."

Third, his life story is, up until now, the stuff of inspirational movies.  To  read of his family and his life and only then to consider his crimes is like -- well, it's a little like watching :"The Miracle Worker" in a special edition with a new tacked-on ending where Anne Sullivan embezzles money from the Keller family.

Fourth, though, it's good to see that the London law firm of Kingsley Napley is still with us.  They represented Nick Leeson.  He went to the recognized experts in rogue trader defense for counsel.


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