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A drunk trader scares the world… and loses $520 million June 30, 2010

Posted by mytruthaboutoil in Oil trading.
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It is not uncommon for financial traders to wonder how they burnt so much cash during a drunken night on the town. But Steve Perkins was left with a bigger black hole when his employer rang one morning to ask what he had done with $US520 million of the oil trading firm’s money. At 7.45am on June 30 last year the broker for PVM Oil Futures was contacted by an administration clerk asking why he had bought 7 million barrels of crude in the middle of the night.

By 10am it emerged that Mr Perkins, 34, had single-handedly moved the global price of oil to an eight-month high during a drunken blackout. Prices leapt by more than $US1.50 a barrel in under half an hour at around 2am, the kind of swing caused by events of geopolitical significance.

By the time PVM realised the trades were not authorised and swiftly began to unwind the positions, losses of exactly $US9,763,252 had stacked up.

Details of the bizarre incident have only just been made public after a British Financial Services Authority investigation.

According to the regulator, Mr Perkins first started trading irregularly the day before the enormous price spike. He had been drinking heavily over the weekend at a PVM golf event.

Records show that he placed a legitimate order for a client at 1.34pm. This was quickly followed by seven more orders with a value of $US8 million using PVM’s cash.

In the early hours of the morning, he returned to the oil market via his laptop. He placed an incredible $US520 million in orders through ICE Futures Europe. The first trade, at 1.22am, was at $US71.40 a barrel and the last trade at 3.41am was at $73.05. During this period, he gradually edged up the price by bidding higher each time, until he was responsible for 69 per cent of the global market volume.

By 6.30am, he appeared to have realised what he had done. He sent a text message to the managing director claiming an unwell relative meant he would not be coming in to work. When PVM challenged his story, he confessed and co-operated with the inquiry. He told investigators he has ”limited recollection” of the entire episode, claiming he had placed the trades during a drink-induced stupor.

Mr Perkins was banned from trading for five years and fined £72,000 ($127,000), reduced from £150,000 because of potential financial hardship.

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