Last Updated on September 19, 2023
Nick Leeson is a celebrity business speaker and trading educator worth $3 million. However, he is better known as the rogue trader who lost $1.4 billion of his employer’s money and caused the collapse of the 230-year-old Barings bank.
Nick Leeson’s Early Life
Nicholas William Leeson was born on February 25, 1967, in Watford, Hertfordshire, England.
His father was a self-employed plasterer, and his mother was a nurse. Nick Leeson attended the Partmiter’s school in Garston, Hertfordshire.
He didn’t go to college after graduating from secondary school in 1985. Instead, he went to work as a clerk at Coutts Bank. There he settled paper cheques, crediting and debiting client accounts.
Nick Leeson’s Career
The Coutts Bank job kickstarted Nick Leeson’s career in the financial industry.
In 1987, Leeson left Coutts Bank for Morgan Stanley Futures and Options. He worked at the company’s back office, clearing and settling listed derivatives transactions. In search of a front office role, Leeson moved to Barings Bank in 1989.
He quickly made an impression and was promoted to the trading floor. His career embraced an upward trajectory as he rose to top positions in the bank.
In 1992, Barings Bank opened a Future and Options office in Singapore. Nick Leeson was appointed general manager and sent to manage the Singapore futures operations.
In the Singapore office, Leeson proved himself as a star derivatives trader but also got involved in some questionable practices. He made many unauthorized speculative trades that at first made large profits for Barings in the futures market. In 1993 alone, his total gains topped £10 million, accounting for 10% of Barings’ annual profit. Leeson was on top of his game, and his bosses were happy with him. They rewarded him with bonuses of up to £150,000 on his £50,000 salary.
Losses and the “Doubling Strategy”
Emboldened by his “star trader” status and the good life he was enjoying, Leeson started making riskier trades. However, his luck ran out, and the losses started piling up.
At first, Leeson hid them using one of Barings’ error accounts – the now infamous 88888 account. Barings created the account to cover up mistakes made by inexperienced traders.
As a result, the Barings management wasn’t aware of Leeson’s mounting losses. Leeson says he first used the account to hide an error from a subordinate, leading to a £20,000 loss.
However, he continued using the account to hide losses from his bad trades. Desperate to recover his losses, Leeson started using his infamous doubling strategy.
Every time he lost money on a trade, he placed a new trade at double the amount lost. He continued to double his position, hoping to win and recoup all his earlier losses.
The doubling strategy worked a few times but didn’t favor him in the long run. He dug deep into the bank’s reserve to get money for his risky trades. He often fabricated stories and forged documents to support his requests for more cash.
However, his losses only grew. By the end of 1992, the error account had over £2 million in losses. In late 1993, the losses were about £23 million. By the end of 1994, they topped £208 million.
The sky came crashing down on Leeson in early 1995. First, he placed a short straddle, betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit Japan. The Asian markets shifted sharply, and Leeson suffered massive losses.
Then, to recoup the losses, Leeson started using long-long future arbitrage. He was betting that the Nikkei Stock Exchange would quickly recover. He kept increasing his position for a few days. The Nikkei didn’t rise, and his losses reached £827 million (about $1.4 billion).
Leeson’s $1.4 billion trading loss became a world record for losses from unauthorized trades. He held the record until 2008, when Jerome Kerviel lost over $7 billion in unauthorized trades.
Leeson’s Imprisonment
The enormous losses cause huge financial trouble for Barings. The bank didn’t recover, as Leeson’s $1.4 billion losses were twice its available trading capital. On February 26, 1995, Barings was declared insolvent and officially collapsed.
A few days before, on February 23, 1995, Leeson had fled Singapore to avoid prosecution. He left a note reading, “I’m sorry.”
Leeson was eventually arrested in Frankfurt. He was extradited to Singapore to face charges on November 20, 1995. He was charged with 11 crimes, including fraud, for deceiving his bosses about the scale of his losses and the riskiness of his activities.
In December 1995, Leeson pleaded guilty to two counts of deceiving bank auditors and cheating the Singapore Exchange. He was convicted and sentenced to six and a half years in prison.
While in prison, Leeson was diagnosed with colon cancer. He was granted early medical release. In July 1999, he was released from prison after serving only four years and four months.
Leeson’s Later Career
Leeson published his autobiography, “Rogue Trader”, in 1996 while still in prison. It detailed his acts, from being a rising star to a rogue derivative trader and the resulting collapse of England’s oldest merchant bank.
The book quickly became a must-read for finance professionals and students since it highlighted the importance of internal controls at banking institutions.
The book inspired a 1999 film of the same name featuring Ewan McGregor.
Leeson went to college and obtained a Psychology degree in 2003. He published his second book in 2005, titled “Back from the Brink: Coping with Stress.” It chronicles Leeson’s conversations with his psychologists. It offers sound advice on how to deal with financial woes, personal trials, addiction, and illness.
After marrying Irish beautician Leona Tormay, Leeson moved to Galway. He joined the celebrity speaking circuit, specializing in public speaking about shady financial practices.
He still deals in the stock markets. But he now trades only with his own capital.
Leeson was appointed commercial manager of Galway United Football Club. He became the club’s chief executive officer (CEO) in July 2007. He held the position until February 2011, when he resigned.
Nick Leeson’s Net Worth
According to Celebrity Net Worth, Nick Leeson is currently worth $3 million (£2.3 million).
The bulk of his money comes from his book sales. His first book Rogue Trader was a bestseller and continues to rake in money for him. Leeson makes good money from his various celebrity engagements. For example, Leeson received about £40,000 to be a contestant in the Celebrity Big Brother house in 2018. He also makes a lot from his various speaking events, which he said were very lucrative. He added that two events a month are enough to give him the life he’s accustomed to.
A chunk of Leeson’s net worth comes from his salary in Bizantra, a trading academy, where he is Head Educator. In Bizantra, Leeson launched the trading course – The Truth. Through this course, he says he wants to help people avoid the mistakes he made.
Nick Leeson’s Legacy
Leeson is now one of the living examples of how important self-control is when trading. The Barings case highlights the importance of internal banking controls and proper supervision.
After it, institutions were forced to reassess their internal control systems and auditing processes. Thus, the Leeson case now makes banks better equipped to prevent or detect fraudulent activities.
Takeaway: Learn From Nick Leeson’s Mistakes
Nick Leeson will always be remembered as the rogue trader who singlehandedly took down England’s oldest merchant bank.
Leeson’s financial savviness made turned him into a star derivatives trader. He initially made huge profits for Barings Bank. However, a part of his personality traits also led to his downfall. He lost about $1.4 billion of Barings’ money, leading to the bank’s collapse.
Leeson’s case highlighted the need for better internal controls and auditing processes. Because of him, financial institutions are now better prepared for such issues.
Nick Leeson was disgraced, imprisoned, and even diagnosed with cancer. However, he showed remarkable resilience to rise from the ashes and build a successful career as a business speaker and trading educator.
