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”.
-
Burberry’s share price surges despite collapsing profits and job cuts announcementBurberry’s share price has soared, despite collapsing profits and around 1,700 jobs potentially set to be cut, as markets assess the turnaround plan’s effectiveness
-
A break from the excitement: three boring but good investment themes in Asia
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Lorne Michaels: the ringmaster at Saturday Night LiveLorne Michaels created Saturday Night Live, a cultural phenomenon that launched the careers of countless stars in America.
-
'Rachel Reeves' plan to force pension funds into UK assets won't work'Opinion Hustling pension fund cash into British assets sounds like a good idea. It would be better to make Britain an attractive place to invest, says Matthew Lynn
-
Elliot Grainge: the music mogul of the TikTok age who will now helm Atlantic RecordsElliot Grainge, the entrepreneur behind the upstart music producer 10K Projects, has taken over the top job at Atlantic Records, the label synonymous with musical greats. Can he transform its prospects?
-
Supersonic travel: How China could 'leapfrog' US and Europe's commercial aviation industryOpinion Innovation in commercial aviation has been stuck for 60 years. A commercial supersonic jet might be back on the market soon, but will China get there first?
-
How British businesses can tackle Trump's tariffsThe majority of British businesses are likely to take a hit from the chaos caused by Trump’s tariffs to reorder global trade. Companies in the firing line face some difficult decisions, says David Prosser
-
Ben Cohen: The Ben & Jerry’s co-founder who wants to break away from UnileverBen Cohen of Ben & Jerry’s ice cream is seeking to break away from Unilever, the conglomerate he sold out to in 2000. It’s a battle for the soul of the brand synonymous with corporate do-gooding.
