Dishonest oil trader causes Mitsubishi unit to lose $ 320 million
Mitsubishi Corp. said a dishonest oil trader in its Singapore unit lost US $ 320 million in unauthorized transactions disguised as legitimate hedges for customers.
The employee, a Chinese national working at Petro-Diamond Singapore Pte, was fired and reported to police, Mitsubishi said in a statement, declining to name him. The trader, hired in November 2018 to handle oil affairs with China, has engaged “on several occasions” in unauthorized transactions since January, disguising them to “look like hedging transactions,” the parent company said. .
A person familiar with the matter identified the trader as Wang Xingchen, also known as Jack Wang. Calls to Wang’s cell phone were not connecting, while a person who answered the phone at Petro-Diamond’s Singapore office said he had left the company. No other current coordinates were available.
A loss of US $ 320 million would be less than a tenth of Mitsubishi’s projected profit for the year. In August, the giant trading house, the largest of Japan’s so-called sogo shosha, forecasted an annual net profit of 600 billion yen ($ 5.6 billion).
The oil market has a long and colorful history of business failures. Metallgesellschaft AG suffered a loss of $ 1.2 billion in 1994 when a hedging strategy failed. In 2004, China Aviation Oil suffered its infamous $ 550 million blunder when the company was hit with soaring prices.
Another Japanese trading company, Mitsui & Co., was forced to shut down its oil trading unit in Singapore in 2007 after a trader lost US $ 81 million in hidden naphtha trading. The dealer and his supervisor have been jailed. And in December last year, two senior officials at Chinese oil trading giant Unipec were suspended following losses of around $ 656 million.
Beyond oil, another Japanese trading house Sumitomo Corp. suffered the worst rogue commodity trading event ever in 1996 when Yasuo Hamanaka lost US $ 2.6 billion trading copper on the London Metal Exchange.
In the latest industry scandal, Mitsubishi said the employee manipulated data in Petro-Diamond’s risk management system so that transactions appeared to be associated with actual transactions with customers.
“Big losses from trading in derivatives” have been suffered since July, as the price of oil fell, and the unit opened an investigation into the transactions in mid-August when the employee was absent from work , said Mitsubishi. Brent oil, the international benchmark, fell 16 percent from its peak of US $ 67.01 in July to US $ 56.23 in the first week of August.
Petro-Diamond quickly closed the derivative positions once it realized they could result in losses for the business and also determined that they were not associated with any transactions with clients. Mitsubishi said investigations had confirmed that its unit had “sufficient internal controls”.
The trader was fired on September 18 and reported to the police the next day. Singapore police confirmed that a report had been filed, while declining to provide any further information.
Petro-Diamond Singapore achieved sales of US $ 6.7 billion in the year ending March 2018 and EBIT of US $ 18 million, according to the financial profile filed with the accounting regulator of the city.
–With help from Aaron Clark and Andrea Tan