Mitsubishi Japanese trading said last week after an unnamed rogue trader made unauthorized loss-making oil derivatives trades. That resulted in a $320 million loss. Also, to disguise his actions, he allegedly manipulated the risk management system.
Two long lists in the financial and oil trading history joined last week’s viral story about the trading bust at a Mitsubishi subsidiary joins. The gallery of the rogue traders and the hall of infamous oil trades went wrong. That cost financial institution millions of U.S. dollars and reputational damage.
Moreover, infamous rogue traders Nick Leeson, Jerome Kerviel, and Bruno Iksil are joined by the still-unnamed trader at Mitsubishi’s subsidiary Petro-Diamond Singapore Ltd. They became traders who have incurred massive losses to the financial institutions they had worked for. Also, they had made unauthorized derivatives trades.
Derivatives products like oil have positions since the beginning of the year from the trader at Petro-Diamond Singapore, without authorization. As a result, he incurred hefty losses, costing the company US$320 million in oil bets gone wrong. All after oil prices started to slide at the beginning of the summer.
In 1995, one of the most striking events involving a rogue trader took place. Back then, Barings Bank cost the current equivalent of US$1 billion after Nick Leeson appeared to have kept secret files on rogue stock futures trades. Also, London’s oldest merchant bank and the banker to the Queen collapsed because of Leeson’s trades in Singapore.
Furthermore, in early 2008, the discovery showed that Societe Generale’s junior trader lost six times more money than Leeson for his then-employer. Kerviel had $73 billion in stock index futures positions.
The oil derivatives market has also seen several massive trading busts over the past few decades. Apart from these high-profile ‘rogue traders’ in the financial markets.
Mitsubishi and Other Firm’s Oil Losses in History
Oil in Germany and metals conglomerate Metallgesellschaft amassed a loss of $1.3 billion on trading oil futures. As a result, it brought the group on the brink of collapse. To save it, its largest creditor and shareholder Deutsche Bank swooped in.
In 2004, after booking $550 million in oil derivatives losses, fuel trader China Aviation Oil collapsed. Also, executives were arrested and prosecuted for concealing the huge trading losses in the disastrous oil trading strategy. Even after Leeson’s Barings debacle in the biggest scandal in Singapore.
Moreover, in 2006, $81 million on bad bets on naphtha was lost from the Singapore unit of Japanese trading giant Mitsui & Co. The company said that the trader had falsified data to cover up the losses. In addition, Mitsui then closed all the futures and derivatives positions of the Singaporean unit across all petroleum markets.
Naphtha trader, Noriyuki Yamazaki, who is guilty of fraud, had his prison sentence later reduced by an appeals court in Singapore. Also, another Mitsubishi employee, Masatsugu Takahashi also saw his jail term shortened to 18 months from three years.
Furthermore, Sinopec said that it’s trading unit Unipec booked a US$687 million loss on crude oil hedging in the fourth quarter of 2018, earlier this year.
According to Sinopec, because of wrong calls on the oil price moves, the company incurred losses on the futures side of the hedging when oil prices fell. In addition, investigations have shown Unipec has applied some inappropriate trading strategies in hedging crude oil business.