Rogue Derivatives Trader Nick Leeson Confesses To Massive Losses On This Day In Market History

Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On Feb. 24, 1995, derivatives trader Nick Leeson sent a resignation fax to Barings Bank in which he admitted to making fraudulent and unauthorized trades that ultimately resulted in the bank’s bankruptcy.

Where The Market Was: The S&P 500 was trading at 488.11 and the Dow closed the day at 4,011.74.

What Else Was Going On In The World? In 1995, basketball legend Michael Jordan announced he was coming out of retirement and returning to the Chicago Bulls. The New York Times and Washington Post published the 35,000-word manifesto of the Unibomber. A gallon of gasoline cost $1.09.

Rogue Trader Brings Down UK’s Oldest Bank: Leeson joined Barings Bank in 1989 and began making unauthorized speculative trades just three years later. After initially making large profits on his trades, things went south. By the end of 1994, Leeson had secretly lost 208 million pounds (about $328 million), nearly half the entire capital balance of Barings.

In early 1995, Leeson made even more aggressive bets in his secret account. When the Kobe Earthquake struck Japan on Jan. 17, the stock market sold off violently. Leeson’s positions were crushed.

Leeson notified Barons of his losses in a resignation fax on Feb. 24. Barings, the oldest merchant bank in the U.K. at the time, was declared insolvent two days later.

Dutch bank ING Groep NV ING purchased Barings’ assets for the nominal fee of 1 pound, or about $1.58.

Leeson pleaded guilty to two counts of fraud and ultimately served about four years and four months out of a six-and-a-half-year prison sentence before being released in 1999 for good behavior.