Wrong account 1992, Bahrain headquarters decided to send him to Singapore branch to set up futures and options trading department as general manager. No matter what deal you make, mistakes are inevitable. But the key is to see how you handle these mistakes. This is especially true for futures trading. Some people will mistake the "buy" gesture for the "sell" gesture; Someone will buy the contract at the wrong price; Some people may not be careful enough; Maybe someone bought futures in March, but they should buy futures in June, and so on. If something goes wrong, it will cause losses to the bank. After these mistakes happen, banks must deal with them quickly and properly. If the error cannot be recovered, the only feasible way is to transfer the recommendation error to an account named "Wrong Account" in the computer, and then report it to the bank headquarters. When Li Sen worked as a futures trader in Singapore 1992, Bahrain Bank originally had a "wrong account number" with the account number of "99905" to deal with mistakes caused by negligence in the trading process. This was originally a normal wrong account in the operation of the financial system. 1992 in the summer, Gordon Bowser, who was in charge of liquidation in London, called Li Sen and asked Li Sen to set up another "error account" to record minor errors and handle them in Singapore, so as not to bring trouble to the work in London. So Li Sen immediately called Liselle, who was in charge of office liquidation, and asked her if she could set up another file. Soon, Lissel entered some commands into the computer and asked him what account he needed. In China culture, "8" is a very lucky number, so Li Sen takes it as his lucky number. Because the post must be five digits, a "wrong account" with the account number "88888" was born. A few weeks later, the London headquarters called again. The headquarters was equipped with a new computer and asked the Singapore branch to act according to the rules. All error records were still reported directly to London from the "99905" account. The "88888" wrong account was shelved as soon as it was established, but it became a real "wrong account" and was stored in the computer. At this time, the Head Office had noticed many mistakes in the Singapore branch, but Li Sen cleverly avoided them. Using this to forge the neglected account "88888" provides an opportunity for Li Sen to forge accounts in the future. If this account had been cancelled, Bahrain's history might have been rewritten. 1July 992 17, Wang Jin, a trader in Li Sen, made a mistake after only staying in Bahrain for one week: when a customer (Fuji Bank) asked to buy 20 Nikkei futures contracts, the trader mistakenly sold 20 contracts, which was discovered during the liquidation work in Li Sen that night. In order to correct this mistake, 40 contracts must be repurchased, indicating that the loss calculated at the closing price of the day is 20 thousand pounds, and it should be reported to the head office in London. However, under various considerations, Li Sen decided to use the wrong account "88888" to undertake 40 short contracts of Nikkei index futures to cover up this mistake. George, Li Sen's good friend and executor, made a similar mistake. Because George is his best friend, Li Sen motioned him to buy all the 65,438+000 September futures, worth 80 million pounds, and several trading vouchers were not filled in at all. If George's mistake is exposed, Li Sen will have to bid farewell to his already satisfied life. Li Sen can easily record George's mistakes in the "88888 account". But at least three problems bothered him: first, how to make up for these mistakes; Second, how to avoid the internal audit of the London headquarters at the end of the month after the "88888" account was wrongly recorded; Thirdly, SIMEX requires them to add margin every day, and they will calculate how much the Singapore branch loses every day. The "88888" account can also be displayed on the SIMEX big screen. In order to make up for the employee's mistakes, Li Sen transferred the commission he earned to his account, but only if these mistakes were not too big and the amount of losses caused was not too big, but George's mistakes were really too big. In order to earn enough money to compensate all the losses, Li Sen has taken more and more risks. At that time, he was engaged in a large number of long and short trades, because the Nikkei was stable at that time, and Li Sen would earn an option premium from more trades. If you are unlucky and the Nikkei index changes greatly, this transaction will make Bahrain suffer huge losses. Li Sen did very well for a period of time. By July 1993, he had turned the 6 million pounds deducted from the "88888" account into a slight surplus. At that time, his annual salary was 50,000 pounds, and the year-end award was nearly 654.38+10,000 pounds. If Li Sen stops here, the history of Bahrain will also change. In addition to covering up the mistakes in the transaction, another serious mistake is to win over Bonifay, the largest customer of the Nikkei market. In the late period of 1993, the market price soared by more than 1000 points every day for several days, and the computer screen used for settlement records frequently broke down, and the cumulative number of transactions was unclear. Because the system can't work normally, the transaction record depends entirely on manpower. When all kinds of mistakes were discovered, Li Sen lost nearly $654.38+7,000 a day. Having no choice, Li Sen decided to continue to conceal these mistakes. In 1994, Li Sen was numb to the number of losses. The loss of account number 88888 ranged from 20 million to 30 million pounds, reaching 50 million pounds in July. In fact, many transactions made by Li Sen at that time were guided by market trends, not out of his expectations of the market. He became a puppet manipulated by his dangerous position. At this time, he can think about which direction of market changes will make him turn the tables and make up for the loss of account No.88888, so he tries to influence the market changes in that direction. Li Sen's autobiography describes: "I am ashamed of being such a liar-it was just a small mistake at first, but now it has surrounded me like cancer ... My mother certainly doesn't want to raise me like this." From the institutional point of view, the most fundamental problem in Bahrain lies in the confusion of trading and liquidation roles. After Li Sen 1992 went to Singapore, he successively served as the manager of the futures trading department and clearing department in Bahrain and Singapore. As a trader, Li Sen should buy and sell derivatives on behalf of Bahrain's clients, instead of engaging in arbitrage trading in Bahrain. Basically there is not much risk. Because of the agent operation, the risk is borne by the customer himself, the trader only earns commission, and the arbitrage only earns the price difference between the markets. For example, Li Sen made a profit for Bahrain in a short time by taking advantage of the different prices in the Singapore and Osaka markets. General banks allow their traders to hold a certain number of risk positions. However, in order to prevent traders from being exposed to excessive risks in their banks, such permission is usually set quite limited. Through the daily settlement work of the clearing department, banks can also effectively understand and master the situation of their traders and risk positions. Unfortunately, however, Li Sen has two jobs: trading and liquidation. If Li Sen is only in charge of the clearing department, as he was originally assigned, then he will have no need and no chance to cover up the mistakes of other traders, and it will not lead to an out-of-control situation. When the loss reached 50 million pounds, the head office of Bahrain Bank sent someone to investigate Li Sen's account. In fact, there is a balance sheet every day, and there are obvious records every day, showing the problems of Li Sen. Even at the end of the month, Li Sen's false accounts to cover up the problems are easy to find out-if Bahrain really has a strict censorship system. Li Sen forged the deposit of 50 million pounds in Citibank, but this 50 million pounds has been misappropriated to make up for the loss of account No.88888. After checking the account for one month, no one checked Citibank's account, so that no one found that there was no 50 million pounds in Citibank's account. With regard to the balance sheet, Peter Bahrain, chairman of Bahrain Bank, commented in March 1994 that the balance sheet is useless because its composition may undergo major changes in a short time. Therefore, Peter Bahrain said, "It is naive and ignorant to think that disclosing more data on the balance sheet can increase our understanding of a group." No one can imagine the price paid by Bahrain's chairman who doesn't pay attention to the balance sheet! In addition, on June199565438+1October1KLOC-0/,the Audit and Taxation Department of Singapore Futures Exchange sent a letter to Bahrain, raising some questions about the total amount of funds needed to maintain account No.88888, and at this time Li Sen had to ask London to remit more than1million every day. In fact, from 1993 to 1994, the investment of Bahrain Bank in SIMEX and Japan market exceeded11000000, which exceeded the limit of 25% for the total overseas funds of British banks stipulated by the Bank of England. To this end, the Bank of Bahrain held several talks with the Bank of England. 1May, 1994, it obtained the "acquiescence" from the senior officials of the Bank of England in charge of commercial bank supervision, but this acquiescence did not leave any supporting documents, because it violated the internal regulations of the Bank of England and did not ask the top leaders of the relevant departments of the Bank of England. During the two months from Bahrain's discovery to its subsequent bankruptcy, many high-level and senior personnel in Bahrain have been paying attention to this matter, and even the Audit Department of Bahrain headquarters has officially investigated it. But these surveys were easily deceived by Li Sen. Li Sen described this period of time like this: "I feel incredible that no one came to stop me. People in London should know that my figures are all false. These people should know that the cash I ask from the London headquarters every day is wrong, but they still pay the money. " From the perspective of financial ethics, if all the above-mentioned financial practitioners who participated in the "Bahrain incident" are graded, they should be given a failing score. In particular, many senior managers in Bahrain don't go into the possible problems at all, but blindly trust Li Sen and expect him to make money for Bahrain arbitrage. Ironically, two months before Bahrain went bankrupt, that is, 1994 12, at a conference on Bahrain's financial achievements held in new york, 250 Bahraini bankers around the world regarded Li Sen as a hero of Bahrain and gave him a long and warm applause. 199565438+1October 18, the Kobe earthquake in Japan, and the Nikkei index in Tokyo plummeted in the following days. On the one hand, Li Sen suffered more losses, on the other hand, it bought more Nikkei futures contracts, hoping that the Nikkei index would rise to the ideal price range. 65438+1On October 30th, Li Sen obtained funds from London at the rate of10,000 pounds per day, and has bought 30,000 Nikkei index futures and shorted Japanese government bonds. On February 10, Li Sen held 55,000 Nikkei futures and 20,000 Japanese government bond contracts, the number of which reached a record high on the Singapore Futures Exchange. The more transactions, the greater the loss. All these transactions are credited to account 88888. The transactions in the account are hidden by the inspection agency, but the funds needed for additional margin cannot be hidden. Li Sen continues to transfer funds under various pretexts. This looseness is unbelievable. In mid-February, the total share capital of Bahrain Bank was only 470 million pounds. On February 23rd, 1995, the last day of Bahrain futures, Li Sen's efforts to influence the market direction completely failed. The Nikkei stock price closed down to 17885, and the long-term risk position of Lisen Nikkei futures has reached more than 60,000 lots; While the price of Japanese bonds has been rising all the way, its short risk position has reached 26,000 lots. Li Sen's losses to Bahrain finally reached a high of 860 million pounds when Bahrain's top executives were still dreaming of paying dividends the next day, which led to the end of the world's oldest Bahrain Bank. The report on the bankruptcy of Bahrain Bank published in June1995+1October 17 and a feeling in Li Sen's autobiography can also best express our regret over the Bahrain incident. A passage in the conclusion of the report: "If Bahrain Group can take timely action before February 1995, it is still possible for them to avoid collapse. By the end of 1995 1, even if heavy losses have occurred, these losses are only final losses 1/4. If the management of Bahrain knew nothing about the "88888" account before bankruptcy, we can only say that they have been avoiding the facts. " Li Sen said, "A group of people could have exposed and stopped my trick, but they didn't. I don't know the boundary between their negligence and criminal negligence, and I don't know whether they are responsible for me. But if it is in any other bank, I will not have the opportunity to start this crime. "