Mr. Five Percent: The Copper Trader Who Caused a $2.6 Billion Loss

How do you hide $1.8 billion in losses for over a decade? You stay at the same desk, you forge your boss’s signature, and you pray that the market turns around. Chapter 17 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Yasuo Hamanaka, a copper trader at Sumitomo Trading in Tokyo who controlled 5% of the global copper market, lied about it for eleven years, and brought down the biggest single-company trading loss the world had ever seen.

The Man They Called Copper Fingers

Yasuo Hamanaka joined Sumitomo’s copper trading division in 1985 at age 37. He earned two nicknames. “Copper Fingers” for his ability to move the market. And “Mr. Five Percent” because at his peak, he personally controlled about 5% of the entire world copper supply. For one man at one desk in Tokyo, that is an extraordinary amount of power.

His department had already racked up a considerable loss in the mid-1980s. Instead of reporting it, the losses were hidden through secret trades and off-the-books accounts. Hamanaka inherited a mess and decided to trade his way out of it.

Sumitomo had a tradition of rotating traders between positions every few years. Standard risk management. You do not let one person sit on the same book for a decade because that is how you get fraud. But Hamanaka’s department was reporting enormous profits. Nobody wanted to move the guy making so much money. So they broke their own rule and left him there for eleven years with nobody seriously checking what he was doing.

Two Lives

On the surface, Hamanaka was unremarkable. Family of four in a modest house in a Kawasaki suburb. Small car. Nothing flashy.

But he had a second life. Expensive trips with a lover from the Ginza entertainment district. A Swiss bank account. During the day, he traded copper officially for Sumitomo on the London Metal Exchange and NYMEX. At night, he secretly traded for his own account on the same exchanges.

The China Bet

In 1993, Hamanaka spotted something real. China was industrializing fast and needed copper for construction, electrical wiring, everything that comes with building a modern economy. Global copper production was about 20 million metric tons a year, with Chile producing roughly a third. China was about to become the biggest buyer in the world.

Hamanaka bet that prices would rise. Not a bad thesis. But the Chinese government played its own game. They talked prices down publicly, negotiated hard, made it clear they would not pay peak prices. The market did not move the way Hamanaka needed.

Losses piled up. A normal trader would have stopped and reported the damage. Hamanaka did the opposite. He faked balance sheets, forged trading reports, forged his superiors’ signatures for additional credit. Every month the hole got deeper, every month he doubled down.

By the end of 1995, he was drinking heavily and visibly unstable. Still nobody looked at the actual books.

June 1996

The truth finally came out. Hamanaka was forced to reveal $1.8 billion in uncovered futures positions. One point eight billion dollars in hidden losses at one of Japan’s most respected trading houses.

Sumitomo fired him immediately and panic-liquidated everything. Dump all positions. Cut all exposure. Get out now.

The problem with panic liquidation when you control 5% of the global supply is that the market sees you coming. Copper dropped 27% in a single day. That crash added another $800 million on top of the $1.8 billion already in the hole. Total damage: $2.6 billion. At the time, the largest loss ever caused by a single company’s trading operations.

Hamanaka admitted guilt and was sentenced to eight years in prison in 1998.

What Stays With Me

Reading Dennin’s account, this chapter feels less dramatic than some others in the book. No brothers cornering the silver market. No government collapse. Just one man at a desk, lying for eleven years.

But that is exactly what makes it interesting. The Sumitomo scandal is a story about institutional failure. Where was the internal audit? Where were the supervisors whose signatures Hamanaka was forging? How does one trader accumulate almost two billion in secret positions without anybody noticing?

The answer is simple. Hamanaka appeared to be making money. Nobody wanted to question the golden goose. The rotation policy existed to prevent exactly this, and they ignored it because the numbers looked good.

The pattern shows up again and again. Nick Leeson at Barings Bank. Jerome Kerviel at Societe Generale. The mechanics are always the same. One person, too much trust, not enough oversight, and a loss that grows exponentially because nobody catches it early. When a trader is making money, nobody asks how. When the profits stop, everyone discovers the fraud at the same time.

The other thing that sticks is the final act. Sumitomo’s panic turned a $1.8 billion problem into a $2.6 billion catastrophe. The cover-up was bad, but the exit was worse. When you hold 5% of a global commodity and try to sell it all at once, you crash the market on yourself. Sometimes the most dangerous moment is not when the fraud starts. It is when it ends.

Previous: Chapter 16: Silver Wise Kings

Next: Chapter 18: Bre-X Gold Fraud

This is part of my From Tulips to Bitcoins book retelling series.