Details about yesterday's arrest of a UBS employee for making unauthorized trades remain murky, but London police have charged the suspect--Kweku Adoboli--with "fraud by abuse of position and false accounting" while multiple outlets are reporting that Adoboli has admitted to the rogue dealing. If Adoboli is indeed found guilty of committing the fraud, what kind of fate might he meet?
History provides some guidance here. The rogue trader is actually a kind of archetype in the world of high finance--a phenomenon, The Financial Times writes, that "recurs so often that it is an endemic aspect of modern investment banking." The FT explains that Adoboli, like rogue traders of the recent past, "is young, fairly junior and works on a desk" where it's possible to hide losses while appearing to do authorized work. The typical fate for rogue traders appears to be several years in jail and other penalties. While some make improbable comebacks and many ink book deals, others continue to be haunted by their actions. Daniel Fisher at Forbes notes that rogue traders often "defend themselves by saying their colleagues were doing the same things, or their bosses secretly encouraged them to swing for the fences with the bank’s money." Indeed, UBS is in the hot seat today about its role in the latest rogue trading scandal.
Name: Jerome Kerviel
What He Did: Arrested in Paris in 2008 for making unauthorized and unhedged bets that cost Société Généralé over $6 billion
How He Was Punished: Sentenced to three years in prison in 2010, nominally ordered to pay bank back in full for the prepostrously large sum of money he lost, banned from financial industry for life
What He's Doing Now: After his arrest, Kerviel joined the computer consulting firm Lemaire Consultants & Associates, which has ties to Kerviel's lawyer, and wrote a book, Trapped in a Spiral: Memoirs of a Trader. In his most recent interview in October, Kerviel, who is appealing the 2010 verdict, reiterated to the AP that he wasn't the only trader at the bank making risky bets and that his bosses condoned his behavior. At the time of the article, he was making $1,245 a month as a computer consultant.
Name: John Rusnak
What He Did: Arrested in 2002 for faking trades and even posing as a fictitious trader to hide $700 million in losses from unauthorized trades of Japanese yen while working in Baltimore for then-Irish Allied Banks subsidiary Allfirst Financial, which was sold soon after the scandal
How He Was Punished: Sentenced to over seven years in prison in Ohio, ordered to pay $1,000 a month for five years after his release
What He's Doing Now: It's a mystery. According to The New York Times, Rusnak was "released from federal prison last year and has remained out of the headlines since then."
Name: Yasuo Hamanaka (aka "Mr. Copper" or "Mr. Five Percent" for the amount of the global copper market he was estimated to control)
What He Did: Arrested in 1996 for fraud and forgery in the copper market, which cost Japan's Sumitomo Corporation $2.6 billion and sent copper prices tumbling worldwide
How He Was Punished: Sentenced to eight years in prison but released one year early
What He's Doing Now: Hamanaka hasn't spoken to the press in years, but he did tell Bloomberg upon his release in 2005 that he was "amazed" at how the price of copper had risen while he was in jail (once Mr. Copper, always Mr. Copper). Hamanaka, who lives in the Tokyo suburb of Kawasaki, said he planned to start working again in a matter of months but wouldn't say whether he intended to return to copper trading. When The Wall Street Journal approached his small house in 2008, Hamanaka's wife shooed the reporter away. "There's nothing to talk about," she said from the door.
Name: Nick Leeson
What He Did: Arrested in 1995 while trying to flee to the U.K. from his office in Singapore after covering up losses on deritaves bets by setting up fake accounts for imaginary clients, resulting in a loss of $1.3 billion for Barings Bank--a blow that singlehandedly brought down a 233-year-old financial institution that had counted the Queen among its clients (liquidators auctioned off Leeson's trading jacket for nearly $42,000 to help pay back creditors)
How He Was Punished: Sentenced to over six years in prison in Singapore but served only four, receiving a diagnosis of colon cancer during his imprisonment
What He's Doing Now: After his release, Leeson remarried, overcame cancer, became the CEO of an Irish soccer club, and capitalized on his trading debacle. He wrote two books (one of which spawned a movie, Rogue Trader, starring Ewan McGregor) and sold interviews to the highest bidder after Kerviel's arrest. Leeson also got a psychology degree and gives talks to companies on--of all things--risk management, according to his personal website.The site boasts that Leeson is the "'original' Rogue Trader whose unchecked risk-taking caused the biggest financial scandal of the 20th century." Over the last 24 hours, Leeson has been tweeting about the UBS scandal. He's pointing a finger at UBS rather than Adoboli ("financial innovation is all the banks care about, controls are for lesser mortals" and feeling a bit targeted himself ("BBC World News running pictures of me, like being on the run again, everyone here thinking it was me"). David Rose of The Times of London tweets that Leeson, who's flying into the U.K. today from Australia, is "asking for an 'inconvenience fee' for interviews." Rogue trades, in other words, may lose money for banks. But they generate money for Nick Leeson.
Name: Toshihide Iguchi
What He Did: Arrested in 1995 after confessing in a 30-page letter to losing $1.1 billion through unauthorized bond trading in New York for Japan's Daiwa Bank
How He Was Punished: Sentenced to four years in prison (mostly in solitary confinement) in Manhattan, fined $2.6 million in fines and restitution
What He's Doing Now: Iguchi's crime took an emotional toll on him. A bank robber friend in prison, for example, had to talk Iguchi out of a suicidal depression, according to a Wall Street Journal report in 2008. While in jail he wrote a book about his rogue trading--Confession--that topped the bestseller list in Japan, but most of the money he earned went to paying his fines and restitution (an English-language edition of the book followed). After his release in 1999, he and his wife moved to Georgia and he got a $10-an-hour job at a furniture-building shop. He later moved to a small apartment in his native Kobe, Japan and started an English school while his wife stayed behind in the U.S (as of 2008, they were still speaking almost every night). When Jerome Kerviel was arrested, Iguchi had a nightmare about being "in the bank again."