Worst Fails In Financial Trading

Traders must assume risks in any investing activity they decide to undertake. The risks are there regardless of whether they are doing your trade online or offline. But blunders and incompetence have led many traders and institutions into extraordinary losses.

Investing risks will never go away, but being aware of what trading mistakes and incompetence can lead to can help you avoid suffering the same fate.

Here’s a compilation of the worst fails in financial trading and you will certainly learn many lessons to help you invest wisely whether you are interested in forex trade or other financial instruments.

A ‘successful’ trader produces $9 billion loss for Morgan Stanley

A man called Howard “Howie” Hubler, who had been a successful trader in real estate credit swaps, caused Morgan Stanley a staggering $9 billion loss in 2007. His investment blunder led to high-profile departures from Morgan Stanley, including the exit of co-president Zoe Cruz.

Rogue trader authors $7.2 billion loss on the floor at Société Générale

In January 2008, it was claimed that Jerome Kerviel, an employee of Société Générale, engaged in a series of unauthorised trades that caused the bank $7.2 billion. The loss stemmed from equity derivatives gamble.

$6.5 billion loss extinguishes Amaranth Advisors

There was a time when Amaranth Advisors seemed to be the source of magic that helped portfolio managers to improve their returns. The strategies that Amaranth offered portfolio managers enabled them to seize opportunities in almost any sector they found exciting. But in 2006, Amaranth suffered $6.5 billion loss related to natural gas trades that literally put it out of business.

Long-Term Capital Management (LTCM) rams into a $4.6 billion wall

All was just going on well with Long-Term Capital Management (LTCM) until the Russian financial crisis of 1998 turned not to be what it the hedge fund had expected. When Russia defaulted on government bonds, LTCM was left licking a red $4.6 billion wound.

Once smart trader leaves $2.6 billion Sumitomo in the red

Yasuo Hamanaka was the traders who had earned many nicknames because of his aggressive style of trading copper futures. But at some point, he had his day of reckoning that left Sumitomo Corporation $2.6 billion in the dust and took Hamanaka to prison – for eight years. That was in 1996 and the loss came about because Hamanaka engaged in authorised and risky trades in copper futures.

Aracruz loses $2.5 billion

The Brazilian pulp maker made a risky forex bet that ended up costing it $2.5 billion in 2008. In that year, Aracruz bet on the Brazilian currency, the real, gaining against the dollar, but it was wrong. What happened was that the dollar strengthened and pushed Aracruz into a $2.5 billion loss that caused the resignation of the company CFO Isac Zagury.

Rogue trader costs USB $2.3 billion

In 2011, Swiss bank UBS suffered a $2.3 billion loss through unauthorised deals carried out by of its traders at the Delta One/ETs desk.

JPM sufferes $2 billion in risky derivatives trade

JPMorgan has also been stung by a massive loss relating to credit trading. The company accumulated a $2 billion loss through its Chief Investment Office based in London and a trader named Bruno Iksil was said to responsible for the loss.

Orange County treasure’s blunder leads to $1.7 billion loss

In 1994, Orange County, California (USA), accumulated $1.7 billion in losses related to leveraged bond investments. The county’s treasurer, Robert Citron was responsible for the loss because while he bet that interest rates would remain low, what actually happened was that rates rose, leading the massive loss that forced the county into Chapter 9 bankruptcy.

Metallgellschaft didn’t see a $1.3 billion blow coming

In 1993, a German metal and engineering company Metallgellschaft lost $1.3 billion on a speculative bet on oil prices. The company bet that oil prices would increase in the futures market but what actually happened was that oil prices declined. The company’s CEO Heinz Schimmelbusch was the person associated with the loss and he was fired because of the loss.