Falling from Grace: The Nick Leeson Story
Biography of trader Nick Leeson
Early Life and Education
Nick Leeson was born on February 25, 1967, in Watford,
Hertfordshire, England, into a working-class family. His father was a
self-employed plasterer, and his mother worked as a nurse. Leeson attended
Parmiter's School in Garston, where he completed his secondary education.
Despite facing academic challenges, he graduated from sixth form in 1985 with
six O Levels and two A Level passes in English Literature and History. Notably,
he struggled with Mathematics, failing his third subject.
Career Beginnings
After completing his education, Leeson embarked on his
professional journey by securing a clerk position at the Lombard Street branch
of Coutts private bank. In this role, he undertook tasks such as settling paper
cheques and managing client accounts, laying the groundwork for his future
endeavors in the financial sector.
Nick Leeson's Career Trajectory at Barings Bank
Career Transition
In 1987, Leeson transitioned to Morgan Stanley's Futures and
Options back office, where he focused on clearing and settling listed
derivatives transactions. Despite limited opportunities for advancement in the
front office, he sought new horizons and joined Barings Bank two years later,
initially earning £12,000 annually.
International Assignments
Shortly after joining Barings, Leeson, along with four other
settlement specialists, was temporarily relocated to Hong Kong to address
operational challenges in the bank's Jakarta back office. This experience
provided valuable exposure to international operations and financial
intricacies.
Role Expansion in Jakarta
Leeson's tenure in Jakarta saw him assume responsibility for
managing Barings' unpaid share certificates, amounting to a significant £100
million. This role underscored his growing influence within the organization
and his adeptness at handling complex financial transactions.
Fraud Investigation and Return to London
Following his stint in Jakarta, Leeson returned to London in
September 1991 to investigate a case of internal fraud. This investigation
highlighted his capacity for problem-solving and attention to detail as he
navigated the complexities of uncovering fraudulent activities within the
organization.
Falling from Grace: The Nick Leeson Story
Nick Leeson's Role in the Barings Bank Collapse
Expansion into Singapore
In April 1992, Barings Bank made the strategic decision to
establish a Futures and Options office in Singapore, with Nick Leeson appointed
as general manager. Tasked with overseeing both front and back office
operations, Leeson played a pivotal role in executing and clearing transactions
on the Singapore International Monetary Exchange (SIMEX).
Concealment of License Denial
Prior to his relocation to Singapore, Leeson was denied a
broker's license in the UK due to fraud committed on his application. Despite
this setback, neither Leeson nor Barings disclosed this information when he
applied for his license in Singapore, a fact that would later have significant
repercussions.
Initial Success and Unauthorized Trades
Initially, Leeson's speculative trades yielded substantial
profits for Barings, with his trades contributing £10 million, equivalent to
10% of the bank's annual profit. Leeson's success earned him a substantial
bonus, bolstering his position within the organization. However, behind the
scenes, Leeson began engaging in unauthorized and speculative trades,
concealing his losses through deceptive means.
Misuse of Error Account
Leeson utilized one of Barings' error accounts to conceal
losses resulting from his unauthorized trades, initially claiming it was to
rectify mistakes made by subordinates. However, he soon began using the account
to cover his own losses and those of others, resorting to increasingly
deceptive practices to mask the extent of the losses.
Criminal Conduct and Escalating Losses
Leeson's actions escalated into criminal conduct when he
failed to reconcile a significant discrepancy of 500 contracts, resulting in
losses totaling US$1.7 million for Barings. To conceal this massive error and
safeguard his job, Leeson resorted to hiding it within the error account,
marking a critical turning point in the unfolding crisis.
Investigation and Financial Implications
Despite Leeson's claims that he never used the account for
personal gain, subsequent investigations revealed approximately $35 million
tied to him in various bank accounts. This discovery underscored the extent of
the financial mismanagement and deception that ultimately led to the collapse
of Barings Bank.
Nick Leeson's Downfall and Imprisonment
Escalating Losses and Risky Trading
By the end of 1992, the losses in the error account had
surged to £2 million, reaching £208 million by the close of 1994. Leeson's
"doubling" strategy, wherein he doubled his bets to recoup losses,
proved disastrous as losses continued to mount. Despite a vow to avoid the
error account after a successful recovery in 1993, Leeson resorted to
concealing his losses there again, fabricating cover stories to request
additional funds from London to sustain his risky trading endeavors.
Catastrophic Trades and Flight from Singapore
Leeson's downfall was precipitated by a fateful short
straddle he placed on January 16, 1995, betting against significant movements
in the Japanese stock market. The Great Hanshin earthquake on January 17 caused
a sharp downturn in Asian markets, exacerbating Leeson's losses. In a desperate
bid to recover, Leeson made increasingly risky trades, ultimately leading to
massive losses.
Collapse of Barings Bank and Arrest
With losses soaring to £827 million, twice Barings'
available trading capital, the bank's insolvency became inevitable. Barings,
the UK's oldest merchant bank, was declared insolvent on February 26, 1995,
following a failed bailout attempt. Leeson fled Singapore, leaving behind a
note apologizing for his actions. He was subsequently arrested in Frankfurt and
extradited to Singapore on November 20, 1995.
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Legal Proceedings and Imprisonment
Leeson pleaded guilty to multiple charges, including
deceiving the bank's auditors and cheating the Singapore exchange, which led to
a sentence of six and a half years in Changi Prison. Despite grim forecasts due
to a diagnosis of colon cancer, Leeson survived and was released in July 1999
after serving at least two-thirds of his sentence. His autobiography,
"Rogue Trader," detailing his actions, received mixed reviews but
shed light on banking oversight and risk management failures.
Nick Leeson: Post-Prison Endeavors
Academic Pursuits and Speaking Engagements
Following his release from prison, Leeson pursued academic
interests and completed a BSc in Psychology at Middlesex University in 2003. He
transitioned into a career as a keynote and after-dinner speaker, maintaining a
busy schedule with approximately two events per month.
Involvement with Galway United F.C.
Leeson took on various roles at Galway United F.C., starting
as commercial manager in April 2005 and rising to the position of chief
executive officer by July 2007. However, financial difficulties led to his
resignation from the club in February 2011.
Transition to Investigating Financial Misconduct
In March 2023, Leeson joined Red Mist Market Enforcement
Unit, a corporate intelligence firm led by former Black Cube operative Seth
Freedman. In his new role, Leeson focuses on investigating cases of financial
misconduct, leveraging his expertise and experience in the financial industry.
Nick Leeson: Media Presence and Cultural Impact
Book Releases and Psychological Insights
In June 2005, Leeson published "Back from the Brink:
Coping with Stress," a continuation of his story following "Rogue
Trader." The book delves into his experiences with stress, featuring
discussions with psychologist Ivan Tyrrell. Leeson's literary contributions
provide insights into his personal journey and coping mechanisms.
Television Appearance and Reality Show
Leeson ventured into television in 2013 with an appearance
on "Celebrity Apprentice Ireland" aired on TV3. His participation in
the reality show showcased a different facet of his public persona, engaging
viewers with his experiences and interactions within the competitive setting.
Inclusion in Singapore's Crime Chronicle
Leeson's infamous case became part of Singapore's crime
narrative, featured in the e-book "Guilty As Charged: 25 Crimes That Have
Shaken Singapore Since 1965." The publication highlights significant
criminal incidents in the nation's history, with Leeson's story standing out as
one of the top 25 crimes that captured national attention.
Cultural Artefacts and Auctions
Leeson's legacy extends beyond literature and television, as
evidenced by the auctioning of his trading jacket associated with the Barings
scandal. Media reports detailed the sale of Leeson's jacket, offering insight
into the enduring fascination with his role in one of the most significant
financial collapses in history.
Recognition in Film Credits
Leeson's impact on popular culture is cemented by his mention in the credits of the film "Rogue Trader," which dramatizes the Barings Bank losses totaling US$1.4 billion. His name serves as a reminder of the profound consequences
