1. What was the case about? (Summary of the Case)
The case was about how one man single-handedly brought down one of the world’s most historic banks. The man was Nick Leeson and it happened from 1992 to 1995. He did it while holding the position of general manager to Barings Securities in Singapore. As general manager he oversaw both trading and back office needs, something uncommon in the industry due to the fact that it eliminated necessary checks and balances that would prevent such fraud from occurring. He had authority to deal in futures and options order for clients or other firms within Barings and arbitraging price differences between Nikkei futures traded on the SIMEX and Osaka exchange, it was a low risk strategy meant to make small profits. Where Leeson went astray was when he began unauthorized speculation in futures on Nikkei 225 stock index and Japanese government bonds. These trades where highly risky due to the fact that they involved a highly leveraged strategy and depended solely on the markets movement upwards. This strategy is a double edged sword because even though it provided devastating results for Leeson it could of also provided incredible gains if the market would have gone up. Leeson essentially bet that the Nikkei was going to rise. Once the loses started coming in Leeson opened up a secret trading account, account 88888. The account was initially set up to cover a mistake done by one Leeson’s traders in which she mistakenly submitted a purchase order instead of a sell order. Leeson traded his way out of her mistake but found himself in the red once again due to his strategy and bullish sentiment on the Nikkei. As 1995 came along Leeson’s approach remained the same, on January 17th 1995 a 7.2 earthquake hit the Japanese city of Kobe, causing the Nikkei to plummet, one would think this would change Leeson’s approach but his loses where at such a level that he had to be more aggressive to make them back. Once again he bet the Nikkei would rebound, unfortunately it never did. When it was all said and done Leeson had lost $1.4 billion with his irresponsible trading. Barings was then unable to meet SIMEX’s margin call and was therefore declared bankrupt and sold to ING for £1. Leeson was arrested with his wife in Frankfurt, Germany on the same day. He was then convicted to serve six and a half years in a Singaporean prison. 2. Who was (were) the individual (s) and company (ies) involved?
The individual was Nicholas William Leeson, he started his career as a clerk with royal bank Coutts, he then worked for other firms such as Morgan Stanley before ending up with Barings. He made an impression on the bank when he was transferred to Jakarta, Indonesia to handle a back office problem which involved £100 million of share certificates and handled it within 10 months. He was then promoted to the trading floor and eventually was assigned to Barings new operations in the futures markets on the SIMEX as general manager.

Barings bank is the institution involved in this case. It was Britain’s oldest merchant bank, being founded in 1762; it had financed the Napoleonic Wars, Louisiana Purchase and the Erie Canal. It was a bank whose culture and higher management came from merchant banking which didn’t allow them to see the threats in trading. 3. When and where did it happen? It happened from April 1992 to February 1995 in Singapore. It occurred on the Simex trading floor to be exact.

4. Why did it happen?
It was a perfect storm of events. The lack of checks and balances that Barings bank had mixed with Nick Leeson’s experience with Barings systems and his motivation to do it led to the collapse, as a former colleague of Leeson said "If anybody could have covered it up, it would have been him," "He knows the systems inside out.".

The reason why he started taking riskier positions and why he created secret account 88888 was because of a new trader’s mistake which caused a loss of £20,000. He then started trading trying to regain that loss, taking riskier trades each time and increasing the losses.

5. How did the case come to the attention of the media?
The case came to the attention of the media when Barings bank executives discovered Leeson’s trading activity and informed the Bank of England that they would not be able to meet SIMEX’s margin call, therefore declaring them bankrupt. Leeson had fled Singapore to Malaysia with his wife in an attempt to make it to London. They where arrested in Frankfurt.
6. What was the outcome of the case?
Barings Bank collapsed because it was unable to meet SIMEX’s margin call. The bank of England was unable to save it due to the weariness of investors, they believed it was a black box and there wasn’t enough time to account for all the losses. On March 3rd, 1995 it was bought by ING for £1 and took on all of its liabilities. Nick leeson and his wife where arrested the same day in Frankfurt, Germany trying to arrive to England to avoid extradition to Singapore. He went on trial in Singapore and was found guilty of fraud; he was sentenced to serve six and a half years. While in prison he contracted cancer, survived and wrote and autobiographical book called “Rogue Trader”.

7. How could this case been avoided?
The situation could have been avoided if Barings would have had the appropriate checks and balances required to prevent fraud. In Leeson’s own words "I completely recognize my fault in what happened, but it was clear Barings were incompetent, and their lack of oversight was appalling – all the glamour and brains and power were going into inventing new, complicated ways of making money." One could argue that it was due to Leeson’s loose morals; the reality is that every large institution should have appropriate measures set in place in order to prevent these situations.
8. What did I learn from the case?
This case taught me two different lessons from two distinct points. One lesson is from the moral and personal point of view and another lesson is from the managerial point of view. The lesson I learned from the personal point of view is that whenever you find yourself in a situation in which you have power or any responsibility one must not abuse it and if you happen to make a mistake or some wrongdoing it is better to admit your faults instead of trying to hide them or correct them, digging a deeper hole for yourself in the process. The impression I have received is that Leeson’s motivations to commit this fraud weren’t about money, because even though he benefited financially from it he could taken a whole lot more money with his knowledge of Barings systems, therefore I believe he didn’t want to disappoint his colleagues and loved ones which led him to keep the farce going on for so long. From the managerial point of view it taught me that you must always think about the things that can go wrong, not only what can go right, once you think of these things try to find ways to prevent them by setting systems in place that will catch them before anything happens. All in all it’s been a very interesting case which I have taken many lessons from that vary from how the misuse of options can lead to devastating results to the moral choices behind that misuse and how one can better prepare themselves as investors to avoid those types of results.