Product Code Database
Nicholas William Leeson (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorised and speculation trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest existing merchant bank. He was convicted of financial crime in a Singapore court and served more than four years in Changi Prison.
Between 2005 and 2011, Leeson had senior management roles at League of Ireland football club Galway United. After it suffered financial difficulties, he resigned from his position as chief executive officer. He is also active on the keynote and after-dinner speaking circuit, where he advises companies about risk and corporate responsibility. Since 2023, he has been a private investigator dealing with cases of financial misconduct.
In 1987, Leeson moved to Morgan Stanley's Futures and Options back office, clearing and settling listed derivatives transactions. With few prospects for a front office role, he joined Barings Bank two years later, on a salary of £12,000 () a year. With four other settlement specialists, Leeson was briefly seconded to Hong Kong to troubleshoot Barings' back office in the Indonesian capital of Jakarta. He was then transferred to Barings' Jakarta office in 1990, handling some of Barings' unpaid share certificates which amounted to £100 million. Leeson returned to London in September 1991 to investigate a case of fraud in which a Barings employee had used a client's account to trade on a proprietary basis until from the clearinghouses unraveled the scheme.
From 1992, Leeson made unauthorised speculation trades that initially made large profits for Barings: £10 million, which accounted for 10% of Barings' annual profit. He earned a bonus of £130,000 on his salary of £50,000 for that year. Leeson used one of Barings' (accounts used to correct mistakes made in trading) to hide his losses. He later stated that this account was first used to hide an error made by a subordinate who had been assigned to buy twenty for Fuji Bank but sold them instead, costing Barings £20,000.
Leeson used this error account to cover further bad trades by himself and others. For example, he used it to cover mistakes made by one of his traders who frequently came to work after long nights of partying. Leeson believes that he first crossed into out-and-out criminal conduct when he forgot to reconcile a discrepancy of 500 contracts, costing Barings US$1.7 million. He concluded that the only way to hide such a massive error and keep his job was to hide it in the error account. Leeson insists that he never used the account for his own gain, but in 1996 investigators had located approximately $35 million in various bank accounts tied to him.
The beginning of the end occurred on 16 January 1995, when Leeson placed a short straddle in the Singapore and Tokyo , essentially betting that the Japanese stock market would not move significantly overnight. The Great Hanshin earthquake hit early in the morning on 17 January, sending Asian markets, and Leeson's trading positions, downward. Leeson attempted to recoup his losses by making a series of increasingly risky new trades (using a long-long future arbitrage), this time betting that the Nikkei Stock Average would make a rapid recovery. The recovery failed to materialise.
Leeson left a note reading, "I'm sorry" and fled Singapore on 23 February. Losses eventually reached £827 million (US dollar1.4 billion), twice Barings' available trading capital. After a failed bailout attempt, Barings, which had been the UK's oldest merchant bank, was declared insolvent on 26 February. After fleeing to Malaysia, Thailand and finally Germany, Leeson was arrested in Frankfurt and extradition to Singapore on 20 November 1995.
Leeson pleaded guilty to two counts of "deceiving the bank's auditors and of cheating the Singapore exchange", including forgery documents. District judge Richard Magnus convicted Leeson and sentenced him to six and a half years in Changi Prison in Singapore. Leeson was released in July 1999 after serving at least two-thirds of his sentence (4 years and 4 months) for good behaviour, and having been diagnosed with colon cancer, which he survived despite grim forecasts. In 1996, Leeson published an autobiography, Rogue Trader, detailing his acts. A review in the financial columns of The New York Times stated, "This is a dreary book, written by a young man very taken with himself, but it ought to be read by banking managers and auditors everywhere." In 1999, the book was made into a film of the same name starring Ewan McGregor and Anna Friel. The events also form the subject matter of a 1996 television documentary made by Adam Curtis, titled .
In July 2015, Singapore's national daily newspaper, The Straits Times, published an e-book titled Guilty As Charged: 25 Crimes That Have Shaken Singapore Since 1965, which included the Nick Leeson case (Singapore gained its independence in 1965). The book was born out of collaboration between the Singapore Police Force and the newspaper itself. The paperback edition of the book was published and first appeared on the bookshelves in late June 2017. The paperback edition first entered the ST bestseller list on 8 August 2017, a month after its publication.
On 5 April 2007, The Guardian reported that KPMG, the liquidators of Barings, had sold a trading jacket thought to have been worn by Leeson while trading on SIMEX in Singapore. The jacket was offered for sale on eBay but it failed to reach its reserve price despite a highest bid of £16,100. It was subsequently sold for £21,000. In October 2007 a similar jacket used by Leeson's team but not thought to have been worn by Leeson himself sold at auction for £4,000.
His name is mentioned in the credits of Rogue Trader together with Barings Bank losses of US$1,400,000,000.
The couple divorced in 1997, a year after Leeson's arrest. Sims later worked as a flight attendant for Virgin Atlantic.
In 2003, four years after his release from Changi Prison, Leeson married Leona Tormay, an Irish beautician.
Since 2023, he has been a private investigator dealing with cases of financial misconduct. He lives in Galway as of 2023.
|
|
