Sumitomo 1996: Mr. Five Percent Hid a Decade of Losses │File 170 T1

<p></p><p><br></p><p><br></p><p>This episode is part of Financial Forensics Labs — two shows, one forensic methodology: The Due Diligence Files traces how institutions collapse, The Signal Files traces how the good calls get made. Built from primary-record research by a 15-year capital markets professional.</p><p>Get to know the framework, the other show, and the tools built from it — all in one place.</p><p>Explore </p><p><a href="https://www.financialforensicslabs.com.ar/">⁠⁠⁠⁠⁠⁠⁠⁠⁠Financial Forensics Labs — Forensic Finance Intelligence⁠⁠⁠⁠</a></p><p></p><p>Sumitomo Copper Scandal 1996: how one trader at one of Japan&#39;s largest trading houses hid unauthorized losses for roughly a decade, then tried to win them back by cornering 93% of the copper warrants on the London Metal Exchange, a position justified by a circular physical flow that netted to zero.</p><p><br></p><p>This is the financial autopsy of the Sumitomo copper scandal. In 1985, Yasuo Hamanaka and his superior began speculating without authorization on LME copper forward contracts to recover an earlier loss on physical copper trading in the Philippines. The losses reached around $60 million, the superior resigned, and Hamanaka told no one. He kept a secret book of unauthorized trades, destroyed documents, lied to supervisors, and forged data and signatures. The company promoted him to head copper trader the following year. The market came to know him as Mr. Copper and Mr. Five Percent, for the share of the world&#39;s yearly copper supply he was said to control.</p><p><br></p><p>We trace how a hidden loss turned into a corner. Hamanaka ran monthly deals with a small trading firm that bought copper warrants from a Zambian producer, sold them to Sumitomo, and watched Sumitomo sell the same copper back to the same producer, month after month. On paper, that looked like a real copper business needing a hedge. In reality, the metal went around in a circle. Behind that cover, he built roughly two million tonnes of futures and nearly half of all LME warrants by September 1995, and 93% of them by late November. Anyone who had sold copper short and could not deliver had to buy back from him at his price.</p><p><br></p><p>The money came from more than a dozen LME brokers that had each extended roughly $150 million of credit on the strength of the Sumitomo name, and from large American banks, some of it structured as loans tied to copper. Sumitomo was not an exchange member, it traded through brokers,