Trader's Secrets: How to Bankrupt Yourself, the Bank, and the State of California
A couple times a year the press delights the reader - another trader or financier has been arrested who has facilitated his company's accounts with a substantial amount of money.
Trader Kwek Adoboli's scam at UBS AG bank
The latest of the famous scams is a loss Swiss bank UBS AG to the tune of $2.3 billion from the actions of a trader. Kweka Adoboli. However, it is quite possible that this amount is not final - after the details of the incident were made public, the bank suspended its advertising, and the losses may have increased.
Of course, Mr. Adoboli did not immediately lose such a substantial sum - he traded for more than three years, making unauthorized transactions and trading, for example, futures on the S&P500 index and hedging risks on it with fictitious transactions. Apparently, the presence of hedged positions distracted the close attention of his superiors from the trader's actions for the time being.
However, Adoboli is a long way from his predecessor, Trader Jerome KervielMr. Kerviel has already been punished for his actions. Mr. Kerviel has already been punished for his actions, and Adobol is likely to suffer a similar fate.
Jérôme Kerviel - Societe Generale problem
Two years earlier, Kerviel had almost become a national hero in France, having nearly brought down one of the country's largest banks. Despite working in the back office of the bank, where, in fact, no deals are made, Kerviel managed to "ease" the accounts of the French giant by almost 5 billion euros. Moreover, Jerome Kerviel's direct tasks included risk minimization, almost automatic work, which does not give room for imagination. And imagination found another way out. Kerviel knew perfectly well how to bypass the bank's control system - after all, he himself had previously made sure that traders did not exceed the established limits. Playing small lots at first, and then increasing the orders, one day Kerviel lost caution, which attracted the attention of the controllers. Interestingly enough, later both lawyers and the bank itself recognized his actions as irrational: the grief-stricken trader was not acting for personal enrichment, but to prove how unappreciated he was at work.
To understand the damage that Kerviel has done Societe GeneraleThere is only one figure: 35 billion euros. That was the capitalization of the French bank at the time, and the trader's actions, had they not been noticed, would have knocked out the giant.
The bank closed the positions opened by Jérôme Kerviel, simply recording a loss. This calm shook the market and investors as much as the scale of the fraud - but, judging by the story of Mr. Adobol, taught the world's banks little. Still, to date, Kerviel holds the honorable first place in the list of stock exchange fraudsters.
Nick Leeson, who sank Barings Bank.
Other prominent individuals cannot be overlooked either. Take for example the Briton Nika Leesonwho, in 1995, engaged in risky operations with futures on the Nikkei index, Japan, took increased risks and almost brought his bank under the monastery Barings BankHe escaped, leaving behind debts of $1.4 billion and a note asking for forgiveness. Leeson sank the bank - the amount he lost on the stock exchange was twice as much as the working capital of the financial organization. Trader received the punishment he deserved, but his actions did not leave the public alone for a long time - they even made a movie about him.
Robert Seaton: how do you lose a state?
But that's companies and banks. Robert SeightonIn the United States, for example, he lost an entire county in the state of California to bankruptcy. In 1994, Sayton, as county treasurer and tax collection commissioner, began a securities scam, investing county funds into promissory notesthen in high-risk securities. After the US rate hike in 1994, many of Cyton's investments fizzled out and turned into more than $2 billion in debt. He lost, but he lost handsomely!
Of course, banks and financial organizations carefully guard both access to customers' personal accounts and any secret information, and observe confidentiality policies. The cases of Kerviel and Adobol, as well as Leeson and other dodgy minds of their time, are just notable but very rare exceptions to the general rule of banking secrecy.