Nicholas Leeson (English, born February 25 1967) is a former derivatives trader whose unsupervised speculative trading caused the collapse of Barings Bank, the United Kingdom's oldest investment bank.Leeson found a job at Barings in the early 1990s, with almost no financial experience; in a matter of a few years, he was appointed manager of a new operation in futures markets on the Singapore International Monetary Exchange (SIMEX).[1] From 1992, Leeson made unauthorized speculative trades that at first made large profits for his employer, accounting for 10% of Barings' annual income. His luck quickly went sour, and he used a secret account (numbered 88888 -- a number considered very lucky in Chinese numerology) to hide his losses.
By the end of 1992 the account's losses exceeded £2 million, which ballooned to £208 million by the end of 1994. The beginning of the end occurred on January 16, 1995, when Leeson placed a short straddle (an options trading strategy) in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit early in the morning on January 17, sending Asian markets, and Leeson's investments, into a tailspin. Leeson attempted to recoup his losses by making a series of increasingly risky new investments, this time betting that the Nikkei Stock Average would make a rapid recovery. But the recovery failed to materialize, and he succeeded only in digging a deeper hole. Realizing the gravity of the situation, Leeson left a note reading "I'm Sorry" and fled. Losses eventually reached £827 million ($1.4 billion at then-prevailing exchange rates), twice the bank's available trading capital. This led to the bank's collapse.After fleeing to Malaysia, Brunei and finally Germany, Leeson was arrested and extradited back to Singapore on March 2, 1995. While he had authorization for the January 16 short straddle, he was charged with fraud for deceiving his superiors about the riskiness of his activities and the scale of his losses.Sentenced to six and a half years in jail in Singapore, he was released from prison in 1999.
