Mitsubishi says Singapore-based oil trader lost $320 mil in unauthorized trades

By Aaron Sheldrick and Shu Zhang

Mitsubishi Corp, Japan's biggest trading house by revenue, says a trader at its Singapore-based unit has lost $320 million through unauthorized transactions in crude oil derivatives, and the matter has been reported to the police.

The announcement is a blow for the Japanese trading company, which invests in everything from salmon to natural gas and trades many commodities around the world.

It is the first loss of its kind in Mitsubishi's storied history, a company spokesman told Reuters on Friday.

It may be the biggest loss in the oil markets - where trades often blow up - since China's Sinopec Corp said last year it lost about $700 million on crude hedging.

In what will be a reminder of the collapse of Barings Bank after Nick Leeson's trades in Singapore in 1995, and the huge losses at Societe Generale by rogue trader Jerome Kerviel in 2008, the trader that Mitsubishi has alleged carried out a series of unauthorized trade this year disappeared in August.

While trying to locate the trader who had not returned to its Petro-Diamond Singapore (PDS) oil unit after a holiday, Mitsubishi discovered the losses, a spokesman told Reuters.

The PDS employee, who handled crude oil trades for China,"was discovered to have been repeatedly engaging in unauthorized derivatives transactions and disguising them to look like hedge transactions since January of this year," Mitsubishi said in a statement.

While PDS has closed the positions, "we are now examining the total amount of losses," Mitsubishi said, adding that the issue has been reported to the police and the trader's contract terminated. Mitsubishi said it could not identify the trader.

The former employee's desk phone has been disconnected and calls to his cell phone went straight to voicemail.

A PDS representative in Singapore said it could not comment beyond the statement from its parent. Singapore police did not immediately reply to a Reuters query on the matter.

Mitsubishi has a reputation as a careful trader and only reported its first group annual loss in 2016, when commodities markets slumped. It was founded in 1954.

"It's a bit surprising (because) in the Japanese houses there are a lot of checks and double-checks but I'm not sure what automated compliance systems there are, or if they have any," said one long-time trader in the Asian market, who has worked at a Japanese trading house.

Oil prices have been volatile this year. Prices had fallen sharply from a peak in April above $75 a barrel, and then they shot up nearly 20% this week after an attack on Saudi Arabian oil facilities.

Other Singapore-based traders expressed shock at the latest incident of rogue trading.

"PDS needs to straighten compliance and risk management. It's so shocking. The amount is huge," said one trader.

The Mitsubishi spokesman could not say what the impact on the trading house's earnings would be. Profit totalled more than$5 billion in the year through March 2019.

The company announced the loss after trading in its shares ended for the week. Mitsubishi shares fell 0.8% on Friday, while the Nikkei 225 index rose slightly.

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

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Damn! $320 Million... the person had been continually hiding the losses since January. The heads of both Risk and Compliance in both Singapore and Japan should be fired. Mitsubishi Corp., also is the majority stakeholder in Lawson's Convenience stores, 32%.

6 ( +6 / -0 )

Holy Smokes!!! Wonder if a deep bow will be enough?!?!

5 ( +5 / -0 )

Mitsubishi Corp, Japan's biggest trading house by revenue, says a trader at its Singapore-based unit has lost $320 million through unauthorized transactions

Gladly it can be known immediately unlike Olympus and other scandal. Because it's based outside Japan so no Japan Inc can do cover up for this one. Big name in Japan is quite untouchable so far but only if they stay in Japan not outside.

5 ( +5 / -0 )

If he pays it back at $1 million a year, he should have it all paid off in ......

4 ( +4 / -0 )

alot of cash but child’s play compared to when Nick Leeson brought down Barings in Singapore in the 90’s (the original Rogue Trader). I actually met Leeson and he was a real likable guy.

Still...$320 million is quite its own twisted way. Some corporate Risk Management heads need to roll.

3 ( +3 / -0 )

Pls write clearly, this trader is of what nationality ???. I am sure he or she is not Singaporean. Singaporeans knows the laws of Singapaore and this kind of case will never get away .

-3 ( +1 / -4 )

According to the FT, the rogue trader was "a local hire".

2 ( +2 / -0 )

The trader is Chinese was hired to deal with China market. This was reported in local sg news._

1 ( +1 / -0 )

Folks it does not matter what Nationality the said Trader was/is. What does matter is that there are serious questions over financial oversight at Mitsubishi.. one has to wonder where else within that Company, financial malpractice is taking place. Furthermore, who are the Auditors in charge ? I think they too may need questioning over why they had not identified the weak spot in reporting that allowed this "Trader" to hide such losses....

This is not good for Japan Stocks as a whole.

3 ( +3 / -0 )

Some corporate Risk Management heads need to roll.

HAHAHA, RISK IS THE BANK! That's why they employ the best psychometric testing available to pick people with huge appetite for risks (ie extreme gamblers) to man their trading desk.

Picture one trader and his/her counter party another risky trader. Only one win. BUT, we the outsiders are the ones paying the price, and that's why the system and the risk and compliance people will always have their job.

Why/how we pay? When you buy a car, the cost of currency hedging is in the car. The more volatile, risky the situation, the higher the cost.

When you take out a mortgage.....GFC.

-1 ( +0 / -1 )

Mitsubishi said it could not identify the trader.

This a serious governance lapse - they don't even know the identity of the trader.

1 ( +1 / -0 )

Local hire means what ??? 120% Singaporean ???.

0 ( +0 / -0 )

Inside job, that employee is living large right now. If they had it AI may have caught and stopped unauthorized transactions.

0 ( +0 / -0 )

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