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- [00:00]
Lindsey Graham
There are more ways than ever to listen to History Daily ad free. Listen with Wondry plus in the Wondery app as a member of Noiser plus at noiser.com or in Apple Podcasts. Or you can get all of History Daily plus other fantastic history podcasts@intohristory.com It's March 2, 1995, at the Frankfurt International Airport in Germany. Year old financial trader Nick Leeson gazes out the window of his plane as it touches down on the Runway. This stop in Germany is supposed to be a layover, just a brief stop on the trip from Singapore back to London. But as the plane slowly arrives at the gate, Nick can see a small group of German police officers waiting on the tarmac. He shares an anxious look with his wife Lisa, who's sitting beside him. They both know who the police officers are looking for. For the last three years, Nick has been working as a general manager for Barings bank, overseeing futures trades on behalf of clients in Singapore and Japan. At least that's what Barings thought Nick was doing. In actuality, Nick was making his own trades, using the bank's money on high risk, high reward bets and losing millions in the process. Up until now, he's been able to hide these losses with accounting tricks, making sure that the higher ups never caught on to what he was doing. But this year, after accruing the equivalent of over $1 billion in losses, the bank has finally discovered the operation. And now Nick and his wife are on the run. As the airplane slowly taxis to a stop at the gate, Nick and Lisa don't make any sudden attempt to escape. They simply grab their luggage from the overhead lockers and politely get in line with the rest of the passengers to disembark. The German police officers spot Lisa first as she steps down onto the tarmac. They approach her and request her passport, and just as they begin asking about her husband's whereabouts, Nick quietly comes up beside her and tells the police that it's him they're looking for. As the rest of the plane's passengers look on with intense curiosity, Nick and his wife follow the police to a van, climb in, and are taken away. For over two centuries, Barings bank held a reputation as a financial institution customers could rely on. But in just a few short years, Nick Leeson undid all of that. A combination of ignorance, blind confidence, and a lack of oversight allowed Nick to operate with impunity and cost. Bering's bank not only its reputation, but its entire existence. When it was forced to cease operations on February 26, 1995. This is a mini meditation guided by Bombus. Repeat after me. I'm comfy. I'm cozy. I have zero blisters on my toes. Blisters. And that's because I wear Bombus. The softest socks, underwear and T shirts that give back. One purchased equals one donated. Now go to bombus.comwondery and use code wondery for 20 off your first purchase. That's B O M B-A-.com wondery and use code wondery at checkout.
- [03:18]
Mentos Representative
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- [04:12]
Lindsey Graham
From Noiser and Airship. I'm Lindsey Graham and this is History. Daily history is made every day on this podcast. Every day we tell the true stories of the people and events that shaped our world. Today is February 26, 1995. The Barings bank collapse it's March of 1992 at the Barings bank offices in London, England, three years before Nick Leeson's arrest in Frankfurt. Nick sits working at his desk. He's been at Barings for three years now and has become a well respected member of the team. During his relatively short time at the bank, Nick has shown himself to be especially adept at dealing with Barings global operations. Thanks to him, the bank's once messy offshoot in Indonesia is now a well respected enterprise in and of itself. But Nick isn't interested in resting on his laurels. The 25 year old wants a new challenge. Specifically, he wants to help Boeing's bank expand its activity in the Singapore market. For the last few months, he's been putting out feelers to the higher ups at the bank to show his interest in the idea and to convince them that with his help, Nick is sure that the bank could make a killing. The plan is to beef up Barings involvement in the Singapore International Monetary Exchange or Cimex. Up until now, the bank has traded stocks there, but hasn't done anything in the futures market. Futures contracts are essentially a promise to purchase a commodity later at a price set. Now, investors can trade futures contracts for a number of reasons, but when it comes to Barings clients, they're most likely to purchase futures in the hopes that the price of these commodities will eventually increase. That way, a client can turn around and sell those futures for more than they originally paid for them. There's often big money to be made, but futures contracts can be risky as well. If the market turns unexpectedly, losses can quickly add up. It takes a skilled trader to make it all work. Nick Leeson is certain he's the man for the job and has lobbied hard for the role. And today is the day he finally gets his wish. Barings bank development officer Tony Dickell steps into Nick's office with incredible news. Not only does the bank want Nick to help establish a base in Singapore, they want him to be the general manager there. Nick is going to run the whole thing. He doesn't take long to accept the offer. And once he lands in Singapore, Nick gets to work quickly. The first order of business is to apply for and receive a broker's license. Considering his sterling reputation in the United Kingdom, Nick gets his license in no time. But on his application in Singapore, he leaves out a key piece of information. Nick does not mention that back home he was initially denied a broker's license because he had an outstanding debt of over $1,000 and received a court order to repay it. But to Nick, this deception is a minor detail. Past transgressions aren't important now. What matters is that he gets a chance to showcase his skills as a trader in Singapore. And with the broker's license secured, he can get started. The first few months on the job go even better than Nick had hoped. It seems that he's a natural in his new role, and the money is soon rolling in. Before the year is out, Nick has earned Barings Bank 10 million pounds, the equivalent of about $35 million today. That's a huge contribution to the bank's overall profits for the year. And as a reward for his efforts, Nick receives a bonus of 130,000 pounds, almost three times his basic salary. It's clear in the eyes of his superiors in London, Nick Gleason is fast becoming the bank's golden boy. But there is something about this initial profit that the bank management doesn't know. The original plan was for Nick to trade futures on behalf of Barings Bank's clients, buying and selling contracts with their money. And as far as Barings knows, that's what Nick did. But he actually decided that he wanted to try a higher risk, higher reward strategy. Without consulting anyone or securing permission, Nick started making speculative trades with the bank's money. Nick figures that what his bosses back in London don't know can't hurt him. And he's just made them a gigantic profit. So if the market continues to serve him well, Nick sees no reason to worry. But while future trades can provide huge profits, they can also result in catastrophic losses. And soon, Nick's luck will run out. The early successes will be eclipsed by mounting failures and. And determined to cover up his mistakes, Nick will discover a handy way of simply making these losses disappear. But as he continues to blow through the bank's money, it will become harder and harder for him to maintain the lie. This is a Reese's Peanut Butter cup sound experiment. We're looking to find the perfect way to hear Reese's so you'll buy more of them. Here we go. Reese's. Reese's.
- [09:14]
Reese's Representative
Reese's.
- [09:16]
Lindsey Graham
Reese's. Reese's. Hey, get out of here, you little stinker.
- [09:21]
Capital One Representative
Reese's, Reese's.
- [09:26]
Lindsey Graham
Reese's Peanut Butter Cups. That breathy one sounded very creepy, am I right?
- [09:33]
Arm and Hammer Representative
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- [10:21]
Lindsey Graham
It's July 17, 1992, on the trading floor of the Singapore International Monetary Exchange, four months after British investment banker Nick Leeson moved to the city. The whole room is a cacophony of voices as brokers answer phones, talk to their clients and try to make as many commissions as they can before the end of the workday. Nick is in the middle of the action, working the phones alongside his fellow Barings bank traders. Then the madness of the afternoon is interrupted by the ringing of a bell and everyone erupts in cheers. This bell signals the end of the day's trading and it's Been an excellent one for the market and the Barings bank traders feel confident they've gotten a lot done today. Before he checks out though, Nick wants to go over the trading slips to make sure everything looks right. And that's when he notices a problem. One of his employees, Kim Wong, has made a huge mistake. Instead of buying a bunch of contracts on behalf of her client, she's accidentally sold them. As Nick does some quick calculations, he realizes that it's going to cost Barings 20,000 pounds to fix the error. To some people in the industry, this would be a fireable offense. But Nick feels sorry for Kim and wants to avoid having to let her go. But his solution to the problem isn't exactly above board, even though it is simple. Recently, Barings bank instructed Nick to create an error account to log small mistakes at the Singapore office. He's labeled the account 88888 since the number 8 is considered lucky in some East Asian cultures. Shortly after setting up the account though, Nick's superiors changed their minds and told him to stick with the old system of instantly reporting accounting errors so everything could be handled by London directly. Ever since then, the so called Five Eights account has been dormant, unused and unmonitored. But when Kim Wong makes her mistake, Nick figures once again that what management in London doesn't know can't hurt them. So Nick quietly logs the error into the 58 account. And then he makes up a fake client who bought those same shares and logs it as if it's a real commission. That doesn't change the fact that Barings is still short £20,000. But Nick figures that hiding the mistake will buy him some time to fix the problem on his own. This is supposed to be a one time solution, but Nick soon starts to find it useful to make other issues disappear. It becomes known throughout his team that if mistakes happen, any broker can simply bring the problem to Nick and he'll handle it. And by the end of 1992, Nick has hidden over 30 such errors. But the more losses he squirrels away, the more pressure he feels to earn the money back. He's got a reputation to maintain and so he starts making bigger and riskier trades. The market isn't always reliable though. And over the years a vicious cycle forms. Nick trades aggressively and loses. So he trades even more aggressively and loses again. Nick is in a unique position that allows him to continue this without being detected. He is basically his own supervisor, so he can do what he wants without fear of getting caught. Until 1995, on January 17th of that year, an earthquake hits Japan and virtually collapses the market there. So much trading in Singapore involves the Japanese market that without it, Nick has very little hope of making back the money he's been losing over the years. But he continues to invest, even though his losses now add up to hundreds of millions of pounds. That kind of money is hard to hide, even for Nick Leeson. In February, he gets a message from a clerk at the London office who says there's a strange discrepancy in Nick's trading account. £190,000 seems to be missing, and the clerk can't figure out where it's gone. Nick feigns ignorance but knows the game is up, and in a panic, he decides that he has to make a run for it. On February 23, 1995, Nick will leave a note on his desk that simply says, I'm sorry. Then he and his wife, Lisa, will flee Singapore from Malaysia. A day later, Barings bank will discover the catastrophic losses that Nick has been hiding for years. But by then, it will be too late.
- [14:26]
Arm and Hammer Representative
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- [15:19]
Capital One Representative
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- [16:23]
Lindsey Graham
It's a little after 9pm on February 26, 1995, in the offices of Barings bank in London, London. Barings employees have been gathering here all day, anxiously waiting for news. Everyone knows that the situation is dire. The bank is on the verge of total collapse. For the last few days, any attempts to reach the rogue trader Nick Leeson have failed. After he first disappeared, the Barings auditors started poking around, trying to answer some basic questions about the discrepancies they found in the books. But what originally seemed seemed like a small issue has ballooned into an all out catastrophe. The more the auditors dig into Nick's files, the bigger the problem becomes. This is not just a matter of a few thousand pounds that are missing. Through risky unauthorized trades, Nick has gambled away over two times the available capital of the entire bank. Baring's employees nervously pace around the offices, unsure of what to do. All anyone knows is that a cross across town, a group of senior bankers from other firms are meeting to see if there's any way to save bearings. But it would take a miracle. And as the hours tick by, the less confident anyone feels. The senior bankers talk well into the night. And then finally, the phone rings at Barings offices. An employee grabs it, hoping for good news. But after a moment's pause, he replaces the receiver. Looking around at the anxious faces of his fellow workers, he tells the room the administrators are coming in. Grab what you can and run. Bering's bank has collapsed. But as chaos erupts in the London financial world, the hunt for the man who caused it continues. It takes several more days for the authorities to locate Nick Leeson. But on the tarmac at Frankfurt International Airport, German officials take him and his wife into custody. Nick Gleason is eventually convicted of fraud in a Singapore court and sentenced to six and a half years behind bars. After his release, he will write a memoir titled Rogue Trader, which will then be made into a movie starring Ewan McGregor. And in 2023, Nick will begin working for a firm of corporate private investigators, where he will help companies identify cases of fraud like his own. But it will be difficult for any future fraudster to match the destruction Nick Leeson caused when after years of deception and lies, he brought about the collapse of barings bank on February 26, 1995. Next on History Daily February 27, 1943 during the darkest days of World War II, more than a thousand Jews are released from Nazi detention after their non Jewish wives and family members stage a protest on the streets of Berlin. From Noiser and Airship this Is History Daily Hosted, edited and executive produced by me, Lindsey Graham Audio editing by Mohammed Shazid Sound design by Matthew Filler Music by Lindsey Graham this episode is written and researched by Georgia Hampton Edited by William Simpson Managing Producer Emily Burke Executive producers are William Simpton for Airship and Pascal Hughes for Noiser.
- [19:39]
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