Science Fair Project Encyclopedia
Leeson started secretly speculating on the side in 1992, with a poor but still manageable track record. The beginning of the downward spiral occurred on January 16, 1995, when Leeson placed a short straddle (a type of short selling) for derivative securities in the Singapore and Tokyo stock exchanges, essentially betting that the markets would not move overnight. However, the Kobe earthquake hit early in the morning on January 17, sending Asian markets into a tailspin and Leeson's investments along with them. Leeson attempted to recoup his losses by making a series of increasingly risky new investments, this time betting that the Nikkei would make a rapid recovery, but this failed to materialize and he only succeeded in digging a deeper hole. Losses eventually reached $1.4 billion, twice the available trading capital at the bank, and led to the bank's collapse on discovery.
After fleeing to Malaysia, Brunei and finally Germany, Leeson was arrested and extradited back to Singapore on March 2, 1995. While he had authorization for the initial short straddle, he was charged with fraud for deceiving his superiors about the riskiness of his activities and the scale of his losses, although some observers have placed much of the blame on the bank's own deficient internal auditing and risk management practices. Sentenced to six and a half years in jail in Singapore, he was released from prison in 1999, having been diagnosed with cancer of the colon.
Nick Leeson now lives in Galway on the west of Ireland. Having divorced while in prison, he has now re-married and is now a regular guest on the after-dinner speaking circuit. He was appointed Commercial Manager of Galway United Football Club in April 2005.
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