Mitsubishi oil trader in Singapore fired for losing $ 441 million denies making hidden bets
SINGAPORE (BLOOMBERG) – The Chinese trader fired by Mitsubishi Corp for allegedly losing US $ 320 million (S $ 441 million) in the oil trade has said he is acting on the orders of his executives and is not There had been no unauthorized transactions, according to his lawyer.
Losses at Mitsubishi’s Petro-Diamond Singapore Pte unit result from the company’s “premature” settlement of derivative positions, said Joseph Chen, Singapore-based attorney for trader Wang Xingchen, also known as Jack Wang.
“Our client considers that he has not carried out any unauthorized transactions in crude oil derivatives,” Chen said in a statement.
Last Friday (September 20), Japan’s largest trading house said it expected Petro-Diamond to book losses after discovering that an unidentified trader was “repeatedly” engaged in unauthorized crude derivatives transactions since January, disguising them as hedging transactions. The loss is equivalent to about 6 percent of Mitsubishi’s projected profit for the year.
The case is the latest in a long history of bankruptcies in the oil business, an often opaque and idiosyncratic world where shipments of crude worth hundreds of millions of dollars quietly change hands. While these losses may force Mitsubishi to cut projected profits for the year, they will also raise questions about its business unit’s internal controls, though the company has said they are sufficient.
The deals were discovered in mid-August after a drop in oil prices caused large losses on the company’s derivatives, Mitsubishi said in its statement. The employee was absent from work at the time, he said.
The trader manipulated data from Petro-Diamond’s risk management system so that transactions appeared to relate to real transactions with customers, Mitsubishi said. After recognizing that they could result in a loss for the company, she closed the derivative positions. The trader was fired on September 18 and reported to police the next day, the statement said.
But Wang’s attorney told Bloomberg that his client follows internal reporting procedures and policy at all times and that his transactions are reviewed by Petro-Diamond’s finance team. “Internal controls were in place” throughout the period in question, he said.
Wang was on vacation and then on medical leave in August, according to his lawyer. He has not run away from work and does not want to identify his current location due to concerns for his safety, Chen said, adding that Wang had given “appropriate answers” to Petro-Diamond.
“Our understanding of the facts is as we described in our press statement, and we fully intend to extend our full cooperation to the authorities,” Mitsubishi and Petro-Diamond said in e-mail statements in response. Bloomberg inquiries.
Singapore Police have confirmed that a report has been filed and are investigating the matter, declining to provide any further information.
The company said it subsequently carried out an internal review of its unit and concluded that it had sufficient controls. He added that this was enhanced governance to ensure that any “similar irregularity can be detected at a much earlier stage”.
Little is publicly available information about Wang, but Bloomberg News has pieced together his biography from multiple sources, including former colleagues and business partners. They have asked not to be identified because they do not want to speak publicly about the matter or are not authorized to do so.
Born in 1983 in Liaoning Province, northeast China, Wang graduated with a BS in Mathematics with Actuarial Science from the University of Southampton, UK, followed by a postgraduate degree from the University of ‘Oxford.
He joined the London office of Chinese oil trader Unipec in 2014. In November 2016, he joined the State Oil Co of Azerbaijan (Socar) in London. He moved to Singapore with Socar in August 2017. He left the following June and joined Petro-Diamond in November 2018.
Wang worked for Socar for a short time, but was fired along with the rest of his team “due to reduced transaction volumes,” according to a company spokesperson. No one responded to an email request sent to Unipec’s headquarters in Beijing.
Wang was hired by Petro-Diamond to help them grow their business with Chinese counterparts, particularly independent Chinese refiners – known as teapots – who are an emerging force in that country’s huge oil industry, people said.
Petro-Diamond is Mitsubishi’s overseas oil company, headquartered in Singapore. The unit trades crude oil as well as petroleum products including naphtha, gasoline and fuel oil. Petro-Diamond Singapore achieved sales of US $ 6.7 billion in the fiscal year ended March 2018 and earnings before interest and taxes (EBIT) of US $ 18 million, according to financial profile filed with the city’s accounting regulator.
It represents a small corner of Mitsubishi, the largest of Japan’s so-called sogo shosha, the massive conglomerate group involved in everything from iron ore to fish farms. Mitsubishi is forecasting an annual net profit of 600 billion yen (S $ 7.7 billion) in August.
The oil trading community is still reeling at the news of a new crisis. Last year alone, the Chinese company Unipec was hit with a blow of 656 million dollars because of wrong way bets on the crude.
And while still a long way from the infamous US $ 1.2 billion explosion at Metallgesellschaft AG in 1994, Petro-Diamond’s losses will remain one of the largest in oil industry history.