Toshihide Iguchi
| Toshihide Iguchi | |
|---|---|
 |
|
| Born | 1951 Japan |
| Residence | Japan |
| Nationality | American |
| Education | Psychology, Business Administration |
| Alma mater | Missouri State University |
| Occupation | Former Trader; Author, Speaker, Foreign language technology developer (currently) |
| Employer |
Daiwa Bank (formerly) SpeakGlobal, Ltd. (currently) |
| Known for | Rogue trading |
| Home town | Kobe, Japan |
Toshihide Iguchi (井口俊英 born 1951) was an Executive VP and U.S. Government Bond trader at Daiwa Bank's New York Branch, who was responsible for $1.1 billion in unauthorized trading losses accumulated over a period of 12 years beginning in 1983.
Born in Kobe, Japan, Iguchi moved to the U.S. at age 19 to spend a few months with his father who was living in New York temporarily on business. Enchanted with America, he decided to go to college there and enrolled in Southwest Missouri State College (now called Missouri State University) where he majored in psychology. He married, and worked as a truck salesman at a local Chevrolet dealer during his college years. After graduating, he was hired at Daiwa's New York branch to work in the Securities Custody Department. In 1980, he was given the role of a portfolio manager as well.
In 1983, he lost $70,000 trading Federal Reserve Notes (FRN) and concealed this loss to protect his reputation and job. He continued trading attempting to recoup the loss; however, the loss snowballed. Meanwhile, the Securities Custody Department expanded to the largest department of Daiwa's New York Branch as the Japanese investment in U.S. securities soared. Iguchi's area was producing more than 50% of the Branch's profits. While he was managing the fastest growing division of Daiwa's international division, his clandestine trading operation escalated to recoup ever deepening losses.
In July 1989, Iguchi and his two junior traders made a $3 billion bet on U.S. Treasury Bonds and lost $350 million. Immediately after this incident, as a result of whistle-blowing by one of the dealers, the New York Fed sent an examiner to look into Daiwa’s bond trading operation, but found nothing.
In 1991, the downtown Securities Custody Department moved to the World Financial Center with a new state-of-the-art trading room. It was a bold move because the downtown office was approved by New York State Banking Department as a custody operation center only. Shortly after, Iguchi was promoted to Executive VP of the New York Branch. In 1992, during a New York Fed examination, Daiwa concealed the trading operation in its downtown office from the examiners by relocating the bond traders to the Branch’s main office in midtown.
In 1993, on the advice of its lawyers, Daiwa voluntarily confessed to its falsehood and assured the Fed it was not concealing any impropriety. The Fed conducted a thorough investigation of the operation of the downtown office for two weeks but found nothing unusual. After six months of deliberation at the Federal Reserve Board in Washington, Daiwa received a formal reprimand for their trickery. "Daiwa engineered trickery in hopes of deceiving the Fed examiner and made false statements. Daiwa’s act is a violation of 18 U.S.C. 1005. The Federal Reserve Board hereby requests the management of Daiwa here and in Japan never to engage in this sort of unethical conduct again." The Ministry of Finance in Japan dispatched a group of examiners to check the Daiwa NY Branch following this news, but found no irregularities. Despite this incident, both the New York Fed and the Ministry of Finance of Japan (MOF), the highest regulatory authorities in the US and Japan, couldn't detect Iguchi’s more than $1 billion loss.
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