American Greed: Junior Trader Hides $140M Losses

[Image]( EMAIL}/redirect (Advertisement) Posted on Sunday, December 1st, 2019 By Kyle Dennis on Raging Bull Forex and currency trading is extremely risky … and if you don’t know what you’re doing, you could be in a world of pain. That’s why I stick to easy strategies in stocks and options. Take the Swiss Franc in 2015 when the Swiss National Bank unexpectedly unpegged the franc per euro. That led to the bludgeoning of FXCM (a forex broker), as shares plummeted 88% one day after the “black swan” event. Recently, we saw similar action with the Turkish Lira. In 2018, we saw the Lira whiplash traders… and in 2019, we saw the unstable currency weaken significantly against the U.S. dollar due to political tensions. EMAIL}/redirect (Advertisement) Banks like BNP Paribas and Barclays lost millions… and Citigroup Inc. (CITI) stared in the face of a $180M loss on a loan to a trader who took a bevy of “wrong-sided” bets linked to the Lira. I don’t know what the “smart money” was thinking with this bet… but my guess is they were playing for a bounce and thought they would get paid… little did they know, the markets could remain irrational for extended periods of time. EMAIL}/redirect (Advertisement) One junior trader learned it the hard way. Bloomberg dropped an expose on Morgan Stanley just the other day, noting “The firm is investigating suspected mismarking of securities to conceal losses of as much as $140 million in a portfolio handled day-to-day by London-based Scott Eisner, a 2014 Yale University graduate and associate at the firm…” There were multiple traders in question when it came to the concealed losses. Thiago Melzer was in charge of running the foreign exchange and emerging markets Americas desk, while Mitchell Nadel ran macro trading in the Americas (this included interest rates and currency bets). The 27-year old Eisner managed orders for various currencies… and of course, he knew what was going on with Morgan Stanley’s profit and loss (PnL) — knowing he would either get fired or be moved to a lesser role if he owned up to the losses. So what did these fat cats do? They used currency options and decided to “mismark” their PnL because they knew if they placed a certain value on the currency bets… it didn’t really reflect the true worth. Get this… in the third quarter, Morgan Stanley actually “booked” some of the losses, yet it showed more than a 20% rise in fixed-income trading revenue (part of it was offset by a drop in Foreign Exchange). Little did the bulge bracket know, there was a group of traders who were using funky “accounting” to conceal their losses. The kicker: these traders were either suspended or fired, they got off pretty much scot-free. The traders probably didn’t expect to sit in such massive losses… and that’s the problem with trading currencies — you never really know when things will revert to the norm. EMAIL}/redirect (Advertisement) To get plays EARLY make sure you grab your cellphone (which you are probably doing right now) and join our VIP text messaging list (standard text and messaging rates may apply)to make it even easier, if you are on your cell phone now click this Button Below: [SIGN ME UP NOW]( © 2019 PTE.la PTE, LLC (publisher of PTE.la) is NOT registered as an investment adviser nor a broker/dealer with either the U. S. Securities & Exchange Commission or any state securities regulatory authority. Users of this website are advised that all information presented on this website is solely for informational purposes, is not intended to be used as a personalized investment recommendation, and is not attuned to any specific portfolio or to any user's particular investment needs or objectives. 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