Trader Yasuo Hamanaka
Studying various biographies of famous people, and especially traders, allows many beginners to learn very valuable lessons, avoid mistakes that affected their idols, and also gain a sufficient level of motivation in order to continue on their own path.
However, studying the autobiographies of not only the so-called “Fairy-Tale Heroes” but also the stories of the greatest losers or, as they also like to call them, “Anti-Heroes,” is of great benefit.
Few people think about it, but almost all the major upheavals in the financial markets were provoked by truly brilliant traders, who have long been considered role models.
Studying the biographies of such individuals, you understand how thin the line is between success and failure.
Trader Yasuo Hamanaka was called the “Copper King” for a very long time, and his style of asset management, ability to skillfully predict changes in the price of copper and extract stunning profits for his company made him a role model for thousands of novice traders.
Trader Yasuo Hamanaka was the most workaholic. His employees noted that when everyone went home, Yasuo Hamanaka could sit until three o'clock in the morning and wait for the auction to close, so that he always had the latest information at hand. Many years of experience working for the Sumitomo company completely freed his hands in the trading process.
Hamanaka was a very profitable trader, because it was he who ensured a five-year increase in the price of copper on world markets, which brought huge profits to his company, but his method turned out to be not completely legal.
Global Game Yasuo Hamanaka
At the end of 1989, with his colleague Yasuo Hamanaki, he developed a global copper trading plan, which at the same time was the largest scam. The essence of the plan was to artificially create a shortage of goods by buying them at all possible sites. Naturally, the shortage gives rise to an increase in the value of the asset, which would theoretically allow it to be sold at an inflated price in the future.
Since Hamanaka could not implement this plan officially, he, using the trust of management, began to falsify documents and conduct all his operations outside the main accounting department. Thus, Hamanaki had two reports that were necessary for him and for the management.
Sumitomo was one of the five largest corporations in Japan, so its capital made it possible to pull off this scam. Thus, for five years, Yasuo Hamanaki controlled more than five percent of the world's copper reserves, and his constant purchases led to an increase in the asset by more than one and a half times.
The first nail in Yasuo Hamanaka's plan
For the first time, representatives of the London Mercantile Exchange began talking about possible fraud in the copper market at the end of November 1995, when the emergence of another shortage led to an increase in the difference between cash prices and the price of copper futures by almost $300.
The difference between prices on the commodity exchange and the futures market suggests that behind this shortage is a large trader who is buying copper for speculative purposes and not for commercial purposes. The investigation led to corporate management being notified of abnormal purchase volumes. The Sumitomo board of directors did not respond to the investigation, so Yasuo Hamanaki continued his trading.
In May 1996, the second nail was hammered into Hamanaka's plan when Sumitomo's auditors discovered the wiring of a small copper operation that went through an entirely different bank than the one the company was dealing with. The CEOs thought it was a minor infraction on Yasuo Hamanaka's part, so they promoted him in order to neatly remove him directly from trading.
The auditors' investigation shocked the company's management, since for five years Yasuo Hamanaki had been playing his global game, and all those profits shown in the financial statements turned out to be losses.
The absence of Hamanaka and his massive purchases led to a huge drop in the price of copper, which had been rising rapidly for many years. Many companies that began to expand production due to the high cost of copper lost their money, not to mention Sumitomo itself, which lost over $2.6 billion. The Copper King was put behind bars for 8 years!