Nick Leeson

Nicholas William Leeson (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorised and speculative trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest merchant bank.

Leeson was convicted of financial crime in a Singapore court and served over four years in Changi Prison.

After finishing sixth form in 1985 with six O Levels and two A level passes in English Literature and History with C and D grades respectively, failing his third subject, Mathematics, he was hired as a clerk with the Lombard Street branch of the Coutts private bank, where he settled paper cheques, crediting and debiting client accounts.

In 1987, Leeson moved to Morgan Stanley's Futures and Options back office, clearing and settling listed derivatives transactions.

With few prospects for a front office role, he joined Barings Bank two years later, at £12,000 a year.

With four other settlement specialists, he was briefly seconded to Hong Kong to troubleshoot Barings' back office in the Indonesian capital of Jakarta.

Leeson was then transferred to Baring's Jakarta office in 1990 where he handled some of Barings unpaid share certificates which amounted to £100 million.

He returned to London in September 1991 to investigate a case of fraud in which a Barings employee had used a client's account to trade on a proprietary basis until margin calls from the clearinghouses unraveled the scheme.

In April 1992, Barings decided to open a Futures and Options office in Singapore, executing and clearing transactions on the Singapore International Monetary Exchange (SIMEX).

Barings had held a seat on SIMEX for some time, but did not activate it until Leeson, appointed general manager, was sent to head both front office and back office operations.

Prior to leaving, Leeson was denied a broker's licence in the UK because of committing fraud on his application.

He had failed to report a judgment against him entered by the National Westminster Bank.

Neither Leeson nor Barings disclosed this denial when he applied for his licence in Singapore.

From 1992, Leeson made unauthorised speculative trades that at first made large profits for Barings: £10 million, which accounted for 10% of Barings' annual profit.

He earned a bonus of £130,000 on his salary of £50,000 for that year.

Leeson used one of Barings' error accounts (accounts used to correct mistakes made in trading) to hide his losses.

He says that this account was first used to hide an error made by one of his subordinates.

She had been assigned to buy 20 futures contracts for Fuji Bank, but had sold them instead, costing Barings £20,000.

Leeson used this error account to cover further bad trades by himself and others.

For example, he used it to cover mistakes made by one of his traders who frequently came to work after long nights of partying.

Leeson believes that he first crossed into out-and-out criminal conduct when he forgot to reconcile a discrepancy of 500 contracts, costing Barings US$1.7 million.

He concluded that the only way to hide such a massive error and keep his job was to hide it in the error account.

By the end of 1992, the error account's losses exceeded £2 million, increasing to £23 million in late 1993.

This had been successful for him in the past, including once in 1993 where he was able to cover a £6 million negative balance in the error account and after which he vowed not to use the account again.

Leeson had to maintain his reputation as a trading genius and soon found himself hiding his losses there again.

As the losses grew higher, Leeson fabricated cover stories to explain why he needed more cash from London; his sterling reputation protected him from close scrutiny.

This amount ballooned to £208 million by the end of 1994.

Leeson had followed a "doubling" strategy: every time he lost money, he would bet double the amount that was lost to recoup the amount.

The beginning of the end occurred on 16 January 1995, when Leeson placed a short straddle in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight.

The Great Hanshin earthquake hit early in the morning on 17 January, sending Asian markets, and Leeson's trading positions, downward.

Leeson attempted to recoup his losses by making a series of increasingly risky new trades (using a long-long future arbitrage), this time betting that the Nikkei Stock Average would make a rapid recovery.

The recovery failed to materialise.

Leeson insists that he never used the account for his own gain, but in 1996 investigators had located approximately $35 million in various bank accounts tied to him.

Between 2005 and 2011, Leeson had senior management roles at League of Ireland club Galway United.

After it suffered financial difficulties, he resigned from his position as chief executive officer.

He is also active on the keynote and after-dinner speaking circuit, where he advises companies about risk and corporate responsibility.

Leeson is currently a corporate firm private investigator in charge of dealing with cases of financial misconduct.

He resides in Galway as of 2023.

Nick Leeson was born in Watford, Hertfordshire, and attended Parmiter's School in nearby Garston.

Born to working-class parents on a council estate, his father was a self-employed plasterer, his mother a nurse.