For many, a stock exchange is a place where you can get rich suddenly, you just have to put it on the right horse. Meanwhile, experts claim that the game on the stock markets – a very risky phenomenon. Losses here can be more than one million dollars, while usually not the players themselves lose, but the investors of those funds whose interests they represent. Below will be told about the ten largest exchange losses. Perhaps these stories will warn some naive players against easy money.
Nick Leeson, a loss of 1.3 billion dollars. Nick was one of the most famous “Ruger” in history. In 1992, Lison was only 28, but the rising star of trading has already become known in narrow circles. The young man was lucky, it allowed him to become even the head of the operational department of the Berings Bank, presenting him at the Singapore International Currency Exchange. However, the actions of Leeson brought the bank a huge loss. Nick went into independent speculations of Nikkei futures and options, hiding them for a long time on his own secret account. The turning point in the fate of the young talent came when he put a “short-straddle” on the Nikkei. Such actions caused an effect similar to an earthquake – the Japanese index collapsed the next day. Leeson had no choice but to try to recoup, while making more and more risky bets. He risked, of course, other people’s means. Such actions inevitably led to even greater losses. Is it any wonder that the trusting Baring Bank declared bankruptcy in 1995? A financial institution that lasted 230 years, was eventually sold for just 1 pound, a symbolic price. Nick Leeson himself, after fleeing, was nevertheless arrested and imprisoned in Singapore, where he spent 4 years. A man was released in 1999, after his health deteriorated. At liberty, the former trader became the author of the bestseller Aggressive Trader, which even made a movie. Only here the author’s entire fee was forced to give to the creditors of the bank. Now Nick Leeson gives lectures, receiving fees of at least 100 thousand dollars. Businessmen are willing to pay $ 300 to listen to the legendary financial cheater.
John Rusnak, a loss of 691 million dollars. The American branch of the largest bank in Ireland, the Allied Irish Bank, in 1993 hired John Rusnac at work. This currency trader Allfirst Financial since 1996 began to make very risky operations with the Japanese yen. Naturally, Rusnac had to play a double game. He himself was a quiet, inconspicuous family man. But for his activities, John had to use fake names and documents. This helped him to hide from the partners the growing financial losses, in particular on the Japanese yen. In 1997, Rusnak’s losses amounted to 29.1 million, but appetites grew, in 2001, John had already lost 300 million. It was not enough for Rusnak to conceal his losses, he also forged statements, which was optimistic that the bank continued to make a profit. As a result, the resourceful trader received bonus worth 433 thousand dollars for his “successful” operations. The last straw was the loss of 300 thousand dollars in operations with options. At that time, the total loss amounted to 691 million. Rusnak was sentenced to prison for 7.5 years, the court also sentenced him to pay the entire amount lost by the bank as a result of fraud. The FBI called the Rusnac scam “the largest bank fraud in the United States in the last decade.”
Yasuo Hamanaka, a loss of 2.6 billion dollars. Yasuo Hamanaka got the nickname “Mr. Copper” and “Mr. 5% on the account” for his activities. He worked as a trader for the Japanese company Sumitomo Corporation. She specialized in the copper trade, being one of the largest wholesale suppliers in the country. Hamanaka himself later stated that at a certain stage of his career, all his transactions amounted to 5% of world operations with this metal. Yasuo was an average office manager – he got to work by train, he shared the walls of the office with nineteen employees like him. Only now the Japanese liked to stay at work for a long time. Hamanaka spent his financial machinations from 1986 to 1996, their scale indicates that he was unlikely to act independently. Most likely there was a participation in a large-scale conspiracy, which allowed to change the levels of quotations. Hamanaka bought copper contracts, thereby creating an artificial rush and high prices. The scam came to light in 1996, the fraudster was sentenced to 8 years in prison. The investigation found that the fraudster was also engaged in forging the signatures of other traders, thus concealing his losses. When the market found out about the tricks of Yasuo, copper prices worldwide fell by 15%! As a result, the Japanese left seven of eight years and are now at large.
Liu Chi-Bing, an approximate loss of $ 1 billion. And this trader was engaged in metals. According to some data, he worked for the State Bureau of Reserves of the Republic of China. Glory to Chi-Binu brought him a big bet on the fall of copper prices on the London Metal Exchange (LME). The Chinese decided to acquire 200 thousand tons of copper, which exceeds the reserves of the entire stock exchange and is comparable to the total copper reserves in his country. This intention significantly changed the growth of metal prices. The unlucky player could only hurriedly leave England, never fulfilling his obligations under the contracts. The situation calmed down only thanks to the Chinese authorities, who quickly began to lower the quotes. They achieved this by informing investors about the volume of state reserves 5 times more than previously estimated. At the same time, the authorities strongly denied their connection with Chi-Bin. He allegedly acted at his own peril and risk, therefore he himself should be responsible for all losses. Experts believe that those behind the trader could take advantage of the sharp rise in copper futures. They were able to get the maximum profit in the wake of the hype. China hides any data related to Liu Chi-Bin, so the damage can only be estimated approximately. And the whereabouts of the fraudster is still unknown.
Brian Hunter, a loss of 6.5 billion dollars. Canadian Brian Hunter led the trader in the hedge fund Amaranth Advisors. The man decided to play on the increase in natural gas prices. In 2005, hurricanes Rita and Katrina unexpectedly fell on America, as a result of which futures for blue fuel jumped threefold in price! This allowed Hunter to even get into the prestigious rating of the most honorable traders in March 2006, taking 29th place there. Soon, the threat of hurricanes dropped significantly, and an incorrect assessment of the market by Hunter brought Amaranth advisors losses of 6 billion! The company fired a trader loser. Later, the authorities conducted investigations that eventually established the guilt of the trader, who in an unfair manner tried to influence the market prices of fuel. As a result, Hunter was awarded a $ 30 million fine. His attempts to organize his foundation for doing business were stopped by the authorities, who banned the dubious player from appearing on the exchanges.
Jerome Kerviel, a loss of 7.1 billion dollars. On January 26, 2008, the Paris financial police detained a man who shortly before that brought down world markets. It turned out to be a trader of a large European bank “Société Générale” Jérôme Kerviel. The reason for the arrest was the disappearance from the bank as many as 7 billion dollars! Kerviel began working in the bank in 2000, immediately after graduation. Two years later, he is an assistant trader, and since 2004 he has already begun to conduct independent trading. An inconspicuous player was engaged in futures of European stock indices, he just had to predict with simple tools – whether they would go up or down. The level of the trader was not so high as to make risky or high bets. But Jerome learned to deceive the control system by creating fake deals. The system developed by Kerviel allowed to make bets of 50-75 billion euros, which significantly exceeded the capital of the bank itself, and the budget deficit of the whole of France. Fraud was discovered on January 18, 2008. The bank management at a loss to itself tried to close all positions, however it caused a panic in all world markets. The experts, having studied the materials of the case, concluded that Jerome acted with the consent of his leadership. As a result, there are two cases in the courts of Paris, according to one of them the bank accuses its trader of fraud, and on the other, the anonymous client of Société Générale spoke against the trader. The worst thing about this story is that Kerviel didn’t try to make money personally. He simply arrogantly tried to build a career, risking other people’s money.
John Merivezer, a loss of 5.8 billion dollars. By 1994, John Merivezer was already an experienced trader, dealing mainly with bonds. In the 80s he was able to earn millions for the Salomon Brothers. However, the machinations of one of John’s subordinates led to his resignation. The trader conceived a plan of grand vengeance. To this end, in 1994, he created his own hedge fund Long-Term Capital Management (LTCM), whose assets exceeded 1.3 billion. Merivezer was able to lure away the best Salomon Brothers traders. Among the founders was a lump from the Federal Reserve System and the stock exchange theoretical theorist Myron Scholes. Merivezer attracted by the client, telling about the market strategy, which will reduce the risk to almost zero. The results of the fund were really impressive – 20% of profits in 1994, 43% in 1995 and 41% in 1996. In the spring of 1998, the fund indirectly controlled about 5% of the world market. In the same year, Merivezer staked on the stabilization of the Russian market, acquiring a large debt obligation of Russia. However, soon our country declared a moratorium on the payment of foreign debts, followed by default, which was the first step in the collapse of a powerful fund. So that the financial crisis does not overwhelm other companies, the US administration provided LTCM with a loan of $ 3.65 billion. As a result, the company paid off all of its creditors, closing finally in 2000. Merivezer was killed by an excessive, romantic belief in the laws of the market and the hierarchy of power structures. In fact, it turned out that economic and political intrigues can force a huge country to default, without any preconditions for this.
Julian Robertson, a loss of $ 17 billion. If earlier Julian was listed among the greatest investors, today he is the biggest loser. In 1980, Robertson opened his hedge fund Tiger Management. For 10 years, 8 million investment in it turned into 8 billion. The minimum contribution was 5 million. It was Robertson who most successfully chose where to invest. His personal annual income ranged from 300 to 400 million dollars! But with the beginning of the 90s, Julian begins to gradually lose his hold, he is pursued by failure. In 1996, Robertson was losing 200 million on a deal with US Treasury bonds, two years later, the fund finally collapsed because of the fatally unsuccessful game against the Japanese yen and the burst bubble of high-tech companies. Julian preferred to invest in the most promising stocks in his opinion as part of his strategies. The Tiger Foundation began to bear significant losses, its assets were reduced to 6 billion. As a result, in 2000 it was decided to close all subsidiary investment companies, returning the remaining capital to investors. Robertson himself left Wall Street.
Peter Young, a loss of 400 million dollars. Peter Young worked for Morgan Grenfell Asset Management as a fund manager. The company was later acquired by Deutsche Bank. In 1996, Peter was promptly fired from the company after it was discovered that his European Growth Trust was working with serious violations. The investigation revealed that Young secretly created several fictitious companies that implemented options with shares for his benefit. Yang inflicted losses on 400 million, after which he preferred to flee from justice. After 2 years, the former investor was noticed not far from London, dressed in worn women’s clothes. Yang was accused of organizing a fraudulent scheme. But at the trial, Peter put on women’s clothes and said that he now had to be called exclusively, like Elizabeth. The judges reasonably doubted the responsibility of the accused. Over time, it turned out that Young even inflicted several injuries on himself. The case was eventually closed, because the main defendant was declared insane.
Brothers Hunt, a loss of at least $ 550 million. Between 1979 and 1980, Nelson Bunker and William Herbert Khanty acquired more than 100 million ounces of silver bullion. The legacy of their father, a Texas billionaire, is 6 billion, allowing them to play such a game. This allowed to bring down the price of silver to 50 dollars per ounce. By 1979, the brothers, along with the kings of Saudi Arabia, controlled a third of the world silver market. In January 1980, the first wave of falling quotations began, and on March 27 they even called it “Silver Thursday” for a rapid fall. After the collapse, the brothers were forced to sell 59 million ounces. If earlier they paid 1.75 billion for them, they now saved only 1.2. Thus, losses amounted to at least half a billion. But the brothers continued to act in the same manner, finally bankrupt in 1988. At the trial, they traveled by subway. In addition, the authorities discovered that the Khanty were trying to play a dishonest game, as a result, Nelson was fined 10 million for his attempts to control the prices of metals.