ABSTRACT
The Sumitomo copper manipulation is noteworthy both for the size of the losses and for the length of time the manipulations went undetected. The centerpiece of the manipulation was Yasuo Hamanaka, the assistant general manager of the nonferrous metals division at Sumitomo, the fourth largest trading company in Japan during the period of the manipulation. Prior to the manipulation being uncovered, Hamanaka was apparently well respected within the company. Between 1985 and 1996, Hamanaka worked as a head of a team trading on copper cash and futures markets, obtaining market recognition with the nickname of “Mr Five Percent,” the approximate size of Sumitomo demand within the global copper market. In June 1996, Hamanaka confessed to unauthorized trading for a decade resulting in a loss to Sumitomo of US$2.6 billion. Though Hamanaka’s suspicious activity was reported to LME as early as 1991, with further complaints about Sumitomo’s trading activity throughout the years until the disclosure, no action was conducted until 1995, when the US CFTC and Britain’s Securities and Investment Board launched an investigation into possible price manipulation, and discovered that manipulation by Sumitomo was the source of suspicious market price movements. Ultimately, it was determined that Hamanaka’s unauthorized trading activity was done without the awareness of superiors at Sumitomo.
