Mitsubishi Stock Drops as Rogue Oil Trader Loses $320 Million USD

A rogue trader lost $320 million on wrong-way oil bets, prompting Mitsubishi to fire the person and alert police

Mitsubishi Corp. (OTCPK:MSBHY) falls 3.3% after disclosing that its Singapore-based crude oil and petroleum products trading unit expects to book a $320M loss from unauthorized trades in derivatives.

A rogue employee at a unit of Mitsubishi Corporation used unauthorized trades to bet on oil markets, disguised them to look like "hedge transactions" with customers, then lost millions when the market went south.

Mitsubishi Corp said the derivatives position was quickly closed and investigations were carried out at the subsidiary and other group companies and in-house departments involved in derivatives trading.

While trying to locate the trader who had not returned to its Petro-Diamond Singapore (PDS) oil unit after a holiday, Mitsubishi discovered the losses, a spokesman told Reuters.

"Investigations are now ongoing to determine all of the details", Mitsubishi Corp said. Bloomberg said that a person familiar with the matter identified the trader as Wang Xingchen, also known as Jack Wang.

A PDS representative in Singapore said it could not comment beyond the statement from its parent. Brent oil, the worldwide benchmark, dropped 16 per cent from its July peak of US$67.01 to as low as US$56.23 in the first week of August.

It could be the biggest loss in oil markets since China's Sinopec Corp said past year it had lost about $700 million on crude hedging.

"These investigations confirmed that there are no such problems or risks at present".

He was sacked 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". It was founded in 1954. In August, the giant trading house, the biggest of Japan's so-called sogo shosha, forecast full year net income of 600 billion yen (US$5.6 billion).

The sudden move in Brent crude caught traders by surprise.

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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