Huge losses: Mitsubishi Corp unit loses $320 mn in unauthorised trades

Stock Trader sad

Stock Trader sad

Mitsubishi Corp. said a rogue oil trader at its Singapore unit lost $320 million in unauthorized transactions disguised as legitimate hedges for customers.

A rogue employee at a unit of Mitsubishi Corporation used unauthorized trades to bet on oil markets, disguised them to look like "hedge transactions" with customers, then lost millions when the market went south.

The unit has closed the positions and Mitsubishi is still assessing if the trades will impact its earnings.

PDS fired the employee two days ago and lodged a complaint with police on Thursday, Mitsubishi said in its statement.

A fall in crude prices from July resulted in "large losses", and the subsidiary began investigating the employee's work in mid-August, the statement added, with PDS expecting "to book a loss of approximately US$320 million". Mitsubishi identified the employee as a male Chinese national but did not disclose his name; however, an individual close to the matter has identified Wang Xingchen, also known as Jack Wang, as the culprit.

Mitsubishi says its investigation confirms that PDS has sufficient internal controls in place and that PDS tightened governance to ensure any similar improprieties would be caught at an earlier stage.

The trader was sacked September 18 and reported to police the next day.

Petro-Diamond Singapore declined to comment as the incident is under investigation. The company was founded in 1954. In August, the giant trading house, the biggest of Japan's so-called sogo shosha, forecast full year net income of 600 billion yen (US$5.6 billion).

"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.

The oil market has a long and colourful history of trading busts.

Another Japanese trading company, Mitsui & Co, was forced to close its Singapore oil-trading unit in 2007 after a trader lost US$81 million in hidden naphtha trades the year before.

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