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CH98 | GSI
🕑 Added 2025-02-03 03:35:00 +0000 UTC"You mean that Barings Bank from the UK?"
Landon blinked in surprise as he asked, and Seok-won nodded.
"That’s right."
Founded in 1762, Barings Bank has a long and storied history, spanning over 230 years.
It was well known for brokering the Louisiana Purchase between the U.S. and Napoleon and had deep ties with the British royal family, earning it the nickname the Queen’s Bank.
Although it had faced financial troubles in the past and lost some of its former prestige, it had since adapted to the changing financial landscape, transforming into an investment bank while maintaining a solid presence in London’s financial district.
Andrew furrowed his brows, looking puzzled.
"If I remember correctly, Barings Bank is a private company, meaning it’s not listed on the London Stock Exchange."
"That’s right."
Seok-won took a leisurely sip of his espresso before continuing.
"That’s why we’re going to short Barings Bank’s bonds."
"Bonds?"
Landon and Andrew exchanged shocked glances.
Unlike regular corporate bonds, bank bonds were issued by banks to raise capital.
Because they were backed by financial institutions, they were typically considered safer than other types of bonds and were assigned high credit ratings.
Yet, here was Seok-won, suggesting they short bank bonds. It was hard not to be taken aback.
"Yes. By the end of the year, I want to use as much leverage as possible to sell off Barings Bank bonds."
"……"
Hearing this, both Landon and Andrew immediately realized there was something bigger at play—something they weren’t yet aware of.
Landon straightened up, his voice turning serious.
"Is there a problem with Barings Bank?"
Andrew, equally curious, fixed his gaze on Seok-won.
Leaning back against his chair, Seok-won finally spoke.
"You’ve both heard of Joseph Wesley, haven’t you?"
"Of course."
"If you work on Wall Street, there’s no way you wouldn’t know that bastard."
Andrew scowled as if just saying the name left a bad taste in his mouth.
And for good reason.
Joseph Wesley had been a rising star—an MIT graduate with an MBA from Harvard Business School. He joined the Wall Street investment firm Kidder Peabody and, within just a few years, racked up billions in profits as a star trader.
For a time, he was worshipped by the industry. But that didn’t last long.
It was soon revealed that his massive profits were nothing more than an illusion, created by exploiting flaws in Kidder Peabody’s automated trading system.
When the truth came to light, he instantly went from being a Wall Street icon to a fraud.
The losses were catastrophic. Kidder Peabody, reeling from the financial blow, was ultimately sold off, bringing an end to the firm’s 130-year legacy.
Andrew, still grimacing at the thought, suddenly widened his eyes as a realization struck him.
"Wait… are you saying there’s another Joseph Wesley inside Barings Bank?"
“...!”
Landon, just as shocked, stared at Seok-won.
Without a word, Seok-won placed a large envelope on the table in front of them.
“Take a look at the documents inside.”
Landon hesitated for a moment before reaching out, picking up the envelope, and pulling out the papers inside.
His eyes quickly scanned the contents, his brows furrowing in confusion as he looked up again.
“This is a record of futures transactions from Barings Bank’s Singapore branch.”
Seok-won nodded.
“You’re aware that Barings Bank is an official broker on the Singapore International Monetary Exchange (SIMEX) and conducts futures trading there.”
Commonly referred to as SIMEX, the Singapore International Monetary Exchange was established in 1984 as a financial futures and options exchange.
It had introduced a mutual offset system with the Chicago Mercantile Exchange (CME), allowing traders to clear transactions on either exchange. This made 24-hour trading possible by leveraging the time zone difference between Singapore and the U.S.
“If you check the records, you’ll see that they’ve lost at least $100 million this year alone in futures and options trading.”
“But if you look at Barings Bank’s official financial reports, they don’t just hide the losses—they actually claim they’ve made huge profits in Singapore.”
“The SIMEX transaction records show massive losses, yet Barings Bank insists they’ve made money. That means one of two things: either someone is lying… or both sides are being deceived.”
Seok-won’s voice was low and steady as he glanced between Landon and Andrew, both of whom swallowed hard.
Andrew suddenly leaned forward, his expression urgent.
“Are you saying Brad Cooper is falsifying the trading records?”
“Brad Cooper? Who’s that?”
Landon frowned at the unfamiliar name.
“He’s a star trader who single-handedly generated £20 million in profits last year—accounting for 20% of Barings Bank’s total annual earnings.”
“£20 million? That’s impressive.”
Landon let out a low whistle, visibly impressed.
But Andrew’s face remained tense.
“And the place he manages? That’s SIMEX.”
Landon’s eyebrows shot up as he quickly turned to Seok-won.
“You seem to know quite a bit about Brad Cooper.”
Seok-won’s voice was calm as he posed the question.
Adjusting his gold-rimmed glasses, Andrew responded, “A trader who pulls in tens of millions of pounds in profits every year? Even if he’s buried in some remote corner of Singapore, someone like that is bound to attract attention.”
Meeting Seok-won’s gaze, he added, “Ah, of course, he’s nowhere near your level, Boss. Your performance is simply on another scale. But even by Wall Street standards, his returns are impressive. Plenty of people have been keeping an eye on him.”
“So, I take it you were one of them?”
Seok-won took a sip of his espresso as he asked the question.
“I was considering bringing him in,” Andrew admitted with a sigh. “I thought he had exceptional talent and was about to suggest we scout him for our fund… but I nearly made a huge mistake. I completely overlooked this critical issue.”
A trader generating millions in profits each year—naturally, the idea of recruiting someone like that would be tempting.
Seok-won could understand the reasoning.
"Of course, that’s assuming those profits were real in the first place."
A hint of cold amusement flickered in his mind.
“I wasn’t aware of that,” Seok-won said evenly. “But even if you had made an offer, Brad Cooper would’ve turned it down.”
“…?”
“If he moved firms, all the lies he’s been covering up would come to light.”
“Ah! That makes sense.”
Landon, who had been frowning in thought, suddenly let out a small exclamation.
“But no matter how hard he tries to hide it, he won’t be able to keep it under wraps forever.”
“You think it’s going to unravel soon?” Andrew asked, his gaze sharp.
Seated beside him, Landon licked his dry lips and watched Seok-won intently.
“If my analysis is correct, he’s already at the breaking point.”
"Even if Barings Bank’s audit system is lax, there’s no way they wouldn’t notice a loss of over $200 million."
Landon and Andrew couldn’t hide their shock at the staggering figure Brad Cooper had concealed.
“Two hundred million dollars… That man must have a death wish.”
Landon let out a breath, shaking his head in disbelief.
“At that scale, even Barings Bank would take a serious hit. Now I understand why you told us to short their bonds.”
Andrew, who had been frowning in thought, finally nodded in agreement.
“No later than early next year, this is going to blow up. We need to have everything in place before then.”
“Understood.”
Their eyes gleamed like hunters who had just spotted their prey.
***
November 29, 1994
Barings Bank, Singapore Branch
As soon as trading closed at 6 p.m., Brad Cooper left the trading floor and headed straight to his office. Sitting at his desk, he wrestled with a calculator and stacks of transaction slips.
He had to make sure the figures from the past two days aligned perfectly with the books.
By the time he was done, the city outside had long since gone dark. It wasn’t until past midnight that he finally finished balancing the numbers.
Alone in the dimly lit office, long after everyone else had gone home, Brad glared at the numbers on the calculator display—his face twisted in frustration.
“Damn it.”
He had lost $50,000 in a single day.
But that wasn’t even the worst of it.
The real problem was the 750 futures contracts he had placed last week.
He had bet big on the Japanese stock market weakening, going long on futures. But the market had moved in the opposite direction.
Brad anxiously punched the latest Nikkei index figures into his calculator, his hands trembling.
[9,800,000 USD]
A staggering $9.8 million in unrealized losses.
His pupils dilated as he stared at the figure, his mind racing.
*
*
*
*
*
In recent months, he had barely managed to earn a profit—and now he had blown it all in one fell swoop.
The worst part wasn’t even that: if the market reopened tomorrow and the Nikkei continued to rise, his losses would only grow larger.
“This is absolutely insane!”
Brad slumped back in his chair, his face etched with exhaustion, and splashed some cold water on his face.
At first, he had created an error account labelled “88888” to cover up the losses caused by one of his subordinates’ mistakes.
“At the time, I thought I could quickly recover from it…” he muttered to himself.
Not long after, a successful bet had indeed wiped out the losses hidden in the 88888 account. But that relief was short-lived.
Due to subsequent trading errors and misguided bets, Brad suffered enormous losses. Convinced that he could bounce back as he once had, he refrained from reporting the damage honestly to headquarters, instead continuing to hide everything in the 88888 account.
However, contrary to his hopeful expectations, the losses only mounted. Before he knew it, the hidden deficit ballooned like a snowball—exceeding a staggering $200 million.
The mere thought of the star trader, who had once dominated Singapore’s trading floor with the highest returns at Barings Bank, being exposed as a colossal fraud was enough to send chills down one’s spine.
Seated in the dim light of the empty office, Brad’s face fell into an expression of utter defeat. Yet, he couldn’t allow himself to collapse completely.
“I’ve come too far to just give up now,” he vowed, straightening his back abruptly.
With his eyes bloodshot and his lower lip tightly clenched, he repeated to himself, almost in a self-hypnotic chant, “Just one big successful bet—and I can erase all these losses.”
He added under his breath, “I just have to keep this hidden until then.”
With a mixture of anxious determination and self-justification, Brad manipulated his computer to log into the 88888 account under the administrator profile. He then proceeded to transfer every ounce of his current losses into that account.
In a few tense moments, the computer screen that had previously shown a $50,000 loss in his Barings trading account suddenly displayed a zero balance.
“Perfect. That’s how it’s done,” he murmured.
Deep down, Brad knew he was sinking further into a quagmire the more he tried to fight it, but he refused to acknowledge the inevitable truth. Instead, he steeled himself to ignore it.
To cover the wiped-out margin account resulting from his continuous losses, he drafted a document to request additional funds from the British headquarters.
After attaching a plausible explanation to the remittance request, Brad sat alone in the dark office, watching the fax machine send the documents off to the headquarters in the UK, and whispered to himself,
“Just one more chance. Then I can set everything back to normal.”
TL/n -
Kidder, Peabody & Co. was a prominent American investment bank founded in 1865. It was known for its role in corporate finance, bond trading, and mergers and acquisitions. The firm gained a strong reputation over the decades but faced significant trouble in the late 20th century.
Joseph Jett's fraud at Kidder, Peabody & Co. in the early 1990s was one of the biggest trading scandals of its time. He was accused of fabricating $350 million in fake profits through a complex scheme involving U.S. Treasury bond trades.
How the Fraud Worked =>
Jett, a government bond trader, exploited how Kidder accounted for "forward recon" trades—essentially buying and selling bonds for future settlement. He manipulated the system by booking paper profits upfront while the corresponding losses would only appear later. Since the firm’s accounting didn’t immediately recognize these losses, it seemed like he was generating huge profits.
Kidder Peabody initially believed Jett was a star trader, rewarding him with a $9 million bonus.
When the fraud was uncovered in 1994, the firm had to write off $350 million in fake profits, shaking investor confidence.
General Electric (GE), Kidder’s parent company, lost faith in the bank and sold it to PaineWebber the same year.
Jett was fired and banned from the securities industry, but he denied any wrongdoing.
The SEC charged him with fraud, and while a judge ruled that he had engaged in deceptive practices, he was not found guilty of criminal fraud.
###
Barings Bank, founded in 1762, was one of the oldest and most prestigious merchant banks in the UK. It collapsed in 1995 due to a massive trading fraud committed by Nick Leeson, a derivatives trader based in Singapore.
How the Fraud Happened =>
Nick Leeson, who was supposed to handle low-risk arbitrage trading, secretly took huge speculative positions in Nikkei 225 futures and options. Instead of cutting losses, he tried to cover them up by using an unauthorized trading account (Account 88888) to hide losses.
Initially, he appeared highly successful, earning millions in profits.
When the Kobe earthquake hit Japan in January 1995, the market crashed, causing Leeson's bets to fail.
His losses spiralled to £827 million ($1.4 billion)—more than Barings’ total assets.
The Collapse =>
Barings could not absorb the losses and declared bankruptcy on February 26, 1995.
The bank was sold to ING for just £1.
Leeson fled but was arrested in Germany and later sentenced to 6 ½ years in a Singapore prison.
This scandal remains one of the biggest failures in banking history and led to stricter regulations on risk management.
