World's biggest rogue traders

There is a common factor that binds these men who tried to make a quick buck and ended up in a mess – greed.

'Earth provides enough to satisfy every man's needs, but not every man's greed.' - Mahatma Gandhi.

Recently, a London-based trader of Indian origin, Navinder Singh Sarao, became a victim of his own greed.

Sarao wanted to get rich quickly. The savvy stock market trader's regular buy and sell were not enough to fuel his high ambitions.

On 6 May 6, 2010, he allegedly hatched a plan to play the E-mini S&P 500 futures contracts that are traded on the Chicago Mercantile Exchange, the largest US futures market.

Sarao allegedly used an illegal automated programme to generate massive sell orders. But what happened as a result will go down as one of the historic days of the US stock markets.

His sell orders started to down prices. It created an impression of massive interest to sell the contracts, thereby causing the prices to drop.

Consequently, the Dow Jones Industrial Average plunged more than 1,000 points (about nine per cent) within minutes. The crash briefly wiped out nearly $1 trillion in market value.

Rather than getting worried, Sarao cancelled those trades and bought the contracts at the lower prices to benefit when the market recovered, authorities said.

He is alleged to have made $40 million through manipulation. 

Sarao is now in police custody after he failed to pay $7.7 million as bail amount. 

Sarao will have to be present in court on May 6 if he fails to meet terms of his bail. Sarao’s case for extradition to the US will be heard in September.

But the Indian-origin trader's tricky bet is not an isolated case of traders manipulating the market.

Let's look at some of biggest rogue traders who manipulated the system to make billions...

Harshad Mehta

Stock broker Harshad Mehta orchestrated a massive stock manipulation scheme in 1992, funded by worthless bank receipts, which led to a stock market scam to the tune of $790 million.

‘The big bull’, as he was known as, who reigned over the stock markets for years, took advantage of several loopholes in the banking system.

Mehta and his associates siphoned off funds from bank transactions to make personal gains.

He bought shares at high prices across many segments, triggering a rise in the BSE Sensex.

He was arrested and banned from the stock market for misappropriating more than 2.8 million shares of about 90 companies.

He was charged with 72 criminal offences and more than 600 civil action suits.

Though he tried to establish himself as a stock market advisor, in 1999, the Bombay high court sentenced him to five years rigorous imprisonment. He died in 2001.

Jerome Kerviel

A French trader, Jerome Kerviel was convicted in the 2008 trading loss in Societe Generale.

He was arrested for breach of trust, forgery and unauthorised use of the bank's computers, resulting in losses valued at $6 billion.

According to Jerome Kerviel, his actions were known to senior company executives.

Kerviel had been trading profitably, foreseeing a fall in market prices, but he engaged in several unauthorised trades.

Hailed as a ‘computer genius’, he also tried show he is losing trades to cover up his early gains. He was sentenced to three years in prison.

Later, he also wrote a book called Trapped in a Spiral: Memoirs of a Trader.

Kweku Adoboli

A Ghana-born British trader, Kweku Adoboli worked at Swiss bank UBS’s Global Synthetic Equities Trading team in London.

In 2011, Adoboli was charged with committing fraud and carrying out false accounting practices, taking risky bets on selling exchange traded funds (ETFs), which track stocks, bonds and commodities.

UBS lost a whopping $2.2 billion as a result of his fraudulent deals.

The London court held him guilty of the largest trading loss in British banking history.

He was sentenced to 7 years of imprisonment.

Yasuo Hamanaka

Known as 'copper king', Yasuo Hamanaka worked at Sumitomo Corporation, one of the largest trading companies in Japan.

On June 13, 1996, Sumitomo Corporation reported a loss of $1.8 billion in unauthorised copper trading by Hamanaka on the London Metal
Exchange.

Hamanaka would arrange deals wherein Sumitomo would buy huge quantities of copper and store it.

His modus operandi was to create an artificial shortage of copper. Later, smaller amounts of copper would be released in the markets at high prices.

Hamanaka was imprisoned for eight years in 1997 on account of fraud and forgery in the global copper market. 

Nick Leeson

Nick Leeson’s unauthorised trading led to the collapse of the United Kingdom's oldest investment bank, Barings Bank, in 1995.

Leeson’s foul play cost the bank losses to the tune of $1.3 billion.

Speculating on futures derivatives for the bank, Leeson made a good fortune. However, his activities did not last long.

He set up fake accounts for fictitious clients. As a result, he made huge losses. His efforts to regain the lost fortune were futile.

He was sentenced to six years in prison in Singapore but after he was diagnosed with cancer, he was allowed to leave two years earlier.

However, he bounced back overcoming cancer, and went on to become the CEO of an Irish soccer club.

Besides, he wrote two books, one of which was made into a movie called Rogue Trader.

Toshihide Iguchi

John Rusnak

John Rusnak was a former currency trader at Allfirst bank.

He orchestrated one of the biggest cases of bank fraud in 2002, causing a loss of $700 million.

He created fictitious accounts to hide the huge losses made by him.

However, his tricks did not work for long and his ploy to amass wealth were exposed.

He was sentenced to seven and a half years imprisonment in 2003.

After five years he was shifted to house arrest and by 2009 he was released.