Mitsubishi's Singapore unit fires oil trader, notifies police after $440m loss

Employee found to have engaged repeatedly in unauthorised derivative trades

The trader manipulated data in Petro-Diamond's risk management system so that the transactions looked like they were related to real deals with customers, Mitsubishi said. PHOTO: REUTERS

An oil trader at Mitsubishi Corporation's Singapore unit Petro-Diamond Singapore has been fired and reported to the police after causing losses of around US$320 million (S$440 million) through unauthorised derivative transactions.

Petro-Diamond Singapore has closed the positions, and Mitsubishi is now examining the losses.

The trades were uncovered when the firm investigated the employee's transactions during his absence from work in the middle of last month, Mitsubishi said yesterday.

He was fired on Wednesday and his actions were reported to the police the next day "to take a strong action in response to the violation of internal rules and laws committed".

The police confirmed that a report was made, and are looking into the matter.

The employee, who handled crude oil trade with China, was found to have engaged repeatedly in unauthorised derivative trades since January and disguised them to look like hedge transactions.

The derivative trades appeared to be associated with actual transactions with Petro-Diamond Singapore's customers as the employee was manipulating data in the company's risk-management system.

The firm had been suffering large losses from derivatives trading due to the falling price of crude oil since July, Mitsubishi said.

This prompted it to start investigating the employee. Bloomberg said that a person familiar with the matter identified the trader as Wang Xingchen, also known as Jack Wang.

The Japanese trading house said its investigations showed that Petro-Diamond Singapore has sufficient internal controls in place and has tightened its governance to ensure that any similar impro-prieties can be detected at a much earlier stage.

A spokesman for Mitsubishi, which has a reputation as a careful trader, told Reuters this was the first loss of its kind in its history. The company was founded in 1954.

Petro-Diamond Singapore declined to comment as the incident is under investigation.

Bloomberg reported that the US$320 million loss would be less than one-tenth of Mitsubishi's projected profit for the year. In August, the giant trading house forecast full year net income of 600 billion yen (S$7.7 billion).

A long-time trader in the regional market told Reuters: "It is a bit surprising (because) in the Japanese houses, there are a lot of checks and double-checks, but I am not sure what automated compliance systems there are, or if they have any."

Bloomberg noted the oil market's history of trading busts. Last year, Chinese state oil giant Sinopec suspended two top officials at its trading arm Unipec after US$656 million in losses.

In 2007, Japanese trading company Mitsui & Co closed its Singapore oil trading unit after a trader lost US$81 million in hidden naphtha trades the year before.

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A version of this article appeared in the print edition of The Straits Times on September 21, 2019, with the headline Mitsubishi's Singapore unit fires oil trader, notifies police after $440m loss. Subscribe