Yasuo Hamanaka

Yasuo Hamanaka (浜中 泰男, Hamanaka Yasuo) was the chief copper trader at Sumitomo Corporation- one of the largest trading companies in Japan - and was also known as "Mr. Copper" because of his aggressive trading style and "Mr. Five Percent" because that is how much of the world's yearly supply he controlled.

On June 13, 1996, Sumitomo Corporation reported a loss of 1.8 billion dollars in unauthorized copper trading by Hamanaka on the London Metal Exchange.

In September 1996, Sumitomo disclosed that the company's financial losses were much higher at 2.6 billion dollars (285 billion yen).

Considering the size of the losses and the fact that they were accumulated over more than ten years, many believe that Hamanaka could not have been able to corner the copper market without some kind of knowledge or authorization from his supervisors.

Hamanaka was sentenced to eight years in prison in 1998 and was released in July 2005, one year early.

The Story

Hamanaka was the senior manager responsible for copper trading for Sumitomo Corp., Japan’s largest trader of physical copper. Hamanaka was a trader that did not have a great deal of attention paid to him. This was not due to his lack of a professional reputation. In fact, Hamanaka was so respected that the higher-ups at Sumitomo didn’t even bother to regulate his activity. Hamanaka had such a reputation in his field that he was almost completely left to his own devices.

Hamanaka’s devices proved to be much more dangerous than anyone at Sumitomo could have predicted. A man of many nicknames, Yasuo Hamanaka was widely regarded as one of the most powerful men in the world of copper. Known by his peers as the Hammer, Hamanaka was also referred to as Mr. Copper and Mr. Five Percent. The latter name was a reference to his believed control of 5-10% of the world’s copper.

Also known as the Man in a Gray Suit, Hamanaka’s life did not mimic the image many people had of him. Despite being promoted more quickly than anyone else during his 26 years at Sumitomo, Hamanaka earned a very modest living. It is a Japanese custom for employees to be paid on the basis of seniority, rather than performance. Hamanaka was rewarded the same as any other 26-year Sumitomo veteran. Yet he still took the enormous risk to keep his positions and reputation as high as people assumed.

For 10 years as a copper trader for Sumitomo, Hamanaka attempted the unthinkable. He attempted to corner the copper market and wage his influence over the price of the world’s copper. With the autonomy and resources granted to him by Sumitomo, Hamanaka began acquiring large amounts of copper in an attempt to create a shortage. If the market believed copper to be in more of a demand than it actually was, the price would artificially rise.

For a while, Hamanaka’s plan worked. Hamanaka continued to accumulate copper while most commodities were priced very low due to poor economic conditions. Keeping much of his copper off the market, the price quickly shot up and Sumitomo could then begin selling its copper reserves at a much higher price. Not everyone was fooled by his ploy, as Hamanaka was twice accused of creating a copper “squeeze,” in 1991 and 1993.

As the price of copper grew, more mining companies and facilities began cropping up to take advantage of the boom. This new glut of copper on the market made the copper that Hamanaka had purchased worth less than he liked. This is the part of the story where greed got the best of him. Hamanaka refused to let his positions go, and he continued his plan to prop up the price of copper.

With his losses accumulating, perhaps the Hammer bought into his own hype a little too much. Hamanaka had been striking off-exchange futures contracts that paid handsomely when the price of copper was high. Unfortunately, these profits came at a much higher cost to the company. These losing deals were recorded in a secret account that Sumitomo claimed only Hamanaka knew of. Throughout his decade of deceit, Hamanaka seemed to be the master of his trade, while losing $2.6 billion for Sumitomo. His entire plan was finally unraveled in 1996, after two documents forged by Hamanaka were sent to a unit of Merrill Lynch. So why did he do it?

Once again, Hamanaka did not stand to gain from these dealings. There were no mansions or luxury cars on the horizon. His was not a get-rich-quick scheme. Quite the contrary. Hamanaka’s scheme was a slow and labor-intensive one that gave him no personal fortune. Until his eight-year prison sentence began, Hamanaka lived in a small, modest house on a plot of land he had inherited from his father.

See also

• List of trading losses

External links

• Paul Krugman's article about Hamanaka's losses