The Most Memorable Rogue Traders in Recent History

Rogue trading hasn’t been in the spotlight lately, but continues to stir up intrigue and fear in a market where a few individuals can so easily wipe out billions of dollars in the blink of an eye. Sometimes referred to as the “dark side” of trading for its clandestine nature and sheer recklessness, rogue trading usually describes traders who carry out high-risk trades independently of others and to the detriment of the clients and institutions that employm them.[1] In other words, rogue traders make massive trades in secret. This often results in either massive gains or devastating losses. It’s the latter that has stirred up the most controversy.

Below is a list of eight memorable rogue traders over the years. Their stories are sure to make you cringe.

Nick Leeson

We should just get Nick Leeson out of the way as soon as possible. This British lad brought down Barings Bank, the UK’s oldest merchant bank, in the 1990s on a series of bad trades that amounted to £827 million. Leeson made some pretty good money trading in Barings’ name, including netting 10% of the bank’s profit in 1993.[2] He would later serve five years in prison before serving as CEO of Irish football club Galway United.

Jerome Kerviel

French trader Jerome Kerviel was brought down in January 2008 after authorities uncovered massive fraud that cost Societe Generale Bank, France’s third-largest bank by total assets, around $6 billion. How did he do it? Mostly through arbitrage, a risky practice of simultaneously buying and selling securities in different markets in order to capitalize on differing prices for the same asset. In Kerviel’s case, the offsetting security or portfolio was “fictitious,” according to the bank. In other words, he used $60 billion of the bank’s money on European futures without anyone’s knowledge. He was later sentenced to three years in prison.[3]

Yasuo Hamanaka

Yasuo Hamanaka was found guilty on several charges, including fraud, forgery and price-fixing. His weapon of choice was the copper market. When the dust settled, Hamanaka had cost his firm, Japan’s Sumitomo Corporation, $2.6 billion. He was sentenced to eight years in prison back in 1997. His nickname – “Mr. Five Percent” – refers to the share of the global copper market he was once thought to own.[4]

Peter Young

Peter Young is one of the most memorable rogue traders of all time, not because of the amount of money he stole (which was a cool £220 million) but because of the bizarre events that transpired after he was caught. The former fund manager for Morgan Grenfell Asset Management was dinged for holding 10% of the assets he originally targeted for investment. Oh, and he showed up to his court hearings in a dress. Apparently he attempted his own sex change at one point after he was caught. It’s no wonder the judge voided the guilty verdict on reasons of insanity.[5]

Toshihide Iguchi

Unlike other rogue traders on this list, former Daiwa Bank executive Toshihide Iguchi confessed to his wrongdoings in a 30-page letter. His crime? Unauthorized bond trading, which cost his firm $1.1 billion. Iguchi kept up appearances for over a decade, falsifying a staggering 30,000 trading slips. He served four years in jail in 1996 and was fined $2.6 million.[6]

Bruno Michel Iksil

Also known as “The London Whale,” Bruno Michel Iksil cost JPMorgan up to $4 billion in 2012. He did this through a series of derivative transactions involving credit default swaps. The London Whale was uncovered after a lengthy investigation involving more than 1,000 people. The scandal brought a lot of heat to JPMorgan, which was criticized for its risk management, accounting and internal control systems.[7]

Brian Hunter

Brian Hunter sank Amaranth Advisors with one of the biggest hedge fund collapses in history, costing the firm a staggering $6.5 billion in 2006. He did this by betting the farm on natural gas spreads over several years The CFTC and Federal Energy Regulatory Commission accused Hunter of conspiring to manipulate natural gas prices. It wasn’t the loss that made Hunter a rogue trader, but the size of his natural gas position in a multi-strategy hedge fund whose objective was to deliver consistently positive returns.[8]

John Rusnak

When $700 million and a 37-year-old trader go missing from work on the same day, you know something is fishy. That’s what led AIB executives to John Rusnak in February 2002. Apparently the former trader was able to cover his tracks for nearly a decade, where he lost hundreds of millions of dollars betting on the Japanese yen. He then tried to hide the losses using fake options contracts. Rusnak overshot his $2.5 million trading limit by 3,000 times. He served more than seven years in prison for his misdeeds.[9]

If there’s one thing you can take away from this list, it’s that bad trades don’t necessarily make one a rogue trader. Each of these rogue actors broke away from protocol and tried to cover their tracks in the most ludicrous ways. Too bad for them, they were eventually caught. However, it seems that you can lose billions of dollars through a series of illegal or secret trades and still only serve a few years in prison!

[1] Investopedia. Rogue.

[2] Jason Rodrigues (February 25, 2015). “Barings collapse at 20: How rogue trader Nick Leeson broke the bank.” The Guardian.

[3] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.

[4] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.

[5] Andrew Beattie. “How did Peter Young gain infamy as a “rogue trader”?” Investopedia.

[6] Listverse (March 24, 2008). Top 10 Rogue Traders.

[7] Dan Fitzpatric and Joann S. Lublin (August 20, 2012). “Cold Eye Over ‘Whale’ Probe. The Wall Street Journal.

[8] Alanna Byrne and Daniel P. Collins (June 7, 2012). “Top 10 rogue traders plus 2.” Futures Mag.

[9] Nick Thompson (September 15, 2011). “The world’s biggest rogue traders in recent history.” CNN.

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