Nick Leeson was born in Watford in February 1967 and left school after A-Levels to became a clerk in the Lombard Street branch of Coutts bank. By 1987 he had moved to a “back office” (that is, support) role at investment bank Morgan Stanley before taking up a similar position at Barings Bank, where one of his duties involved investigating a case of fraud. By 1992 he had been promoted to the head of Barings Futures Singapore, where he was responsible for “front office” trading decisions as well as providing administrative support.
What was the scam?
The primary task of Barings Futures Singapore was to carry out orders for clients and to make money by exploiting small differences in prices between the Singapore and Japanese markets. In an attempt to boost profits, Leeson started to make proprietary trades with the bank’s own money, focusing mainly on Japanese market index futures. When these trades went badly, Leeson started to hide the mounting losses in a special account designed to correct trading errors. As the losses grew, he increased the size of his bets, hoping that a change in the market would enable him to repay the balance.
What happened next?
The collapse in the Japanese market following the Kobe earthquake in January 1995 led to yet more losses. They eventually grew so large that Leeson realised it was inevitable he would be discovered. He therefore fled Singapore the next month, confessing his crime in a note he left behind. Eventually captured by the authorities in Germany, he sought extradition to the UK, but was eventually sent back to Singapore, where he was sentenced to six and a half years in prison for fraud and forgery, before being released in 1999.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Lessons for investors
Leeson’s losses cost Barings an estimated £860m, plunging it into bankruptcy. Despite last-minute attempts to organise a bailout, its main operations were purchased by Dutch bank ING for ��1. This ensured that depositors were protected from losses, but subordinated bondholders in the parent company lost most of their £100m investment. Barings’ management was not involved in Leeson’s fraud, but their complacency and arrogance should have been big red flags for investors. Shortly before the collapse, chairman Peter Baring infamously boasted that it was “not actually terribly difficult to make money in the securities business”.
-
Car tax rules are changing: what are the new vehicle excise duty rates?The rules around vehicle excise duty are changing this April. What are they, and how are they going to affect you?
-
Most affordable cities for single homebuyers revealedBuying a home by yourself? Analysis by Zoopla reveals the most affordable cities in the UK
-
Deepseek's Liang Wenfeng: the maths whizz who shook Big TechFew people had heard of Liang Wenfeng until the launch of his DeepSeek AI chatbot wiped a trillion dollars off US technology stocks. His pivot to AI was of a piece with his past exploits.
-
Donald Trump's tariffs spark a global game of thronesWe don’t know what Donald Trump intends or will do next. That is in itself damaging.
-
RedNote: the rise of the new TikTokRedNote, a Chinese rival to social-media app TikTok, has seen millions of US users flock to it in the wake of the US TikTok ban. That caught the company by surprise. What is RedNote and can its popularity last?
-
Australian tycoon Andrew Forrest battles it out with oil giant ExxonMobilIron ore billionaire Andrew Forrest made billions before committing himself to philanthropy. Now he is preparing for a showdown with ExxonMobil.
-
Remembering Sir David McMurtry: Renishaw founder and Concorde engineerSir David McMurtry, co-founder of Renishaw, made a unique contribution to Britain. We look back at his legacy
-
Low Tuck Kwong: the Indonesian mining billionaire who is benefitting from coal boomLow Tuck Kwong’s coal business was in deep trouble a decade ago with no future. Now, he is riding the waves of a global coal boom
-
David Montgomery's potential new ally as he seeks to buy The TelegraphVeteran media mogul David Montgomery has seen off a bid for his media group National World. But he now has his eye on The Telegraph
-
Elon Musk to Taylor Swift - the four key figures who moved markets in 2024We look at the four most influential people in 2024 who moved markets – from Elon Musk reshaping US politics to Rachel Reeves struggling as Britain's chancellor
