Chapter 66: Soviet Collapse (3)

Actually, there was almost no reason for Leeson to come here.

Let’s think about it step by step.

Where is Nick Leeson from? He’s the head of the Singapore branch of the British Barings Bank.

His unique investment method – usually called fraud – cannot be achieved without Nick Leeson’s strong involvement, so Leeson spent most of his time in Singapore.

There was no reason to get a visa and come to the Soviet Union.

But… Leeson deals with CDS and Nikkei futures. Both are areas handled by Daeha Securities and Daeha Investment Bank.

So, it’s not that strange to contact Daeha Group. I persistently clung to that small reason and succeeded in contacting Nick Leeson in Moscow.

‘It’s relatively safe here.’

It’s too close to Korea to meet in Singapore. There are many eyes watching.

“It’s amazing. I thought I was quite young, but you’re no slouch either. Ahah, is this the difference in talent? Anyway, it’s nice to meet you, the head of the Singapore office of the famous Barings Bank.”

“Well, I thought the same thing. It’s been a long time since I’ve seen someone younger than me, so… at our level, I mean.”

“Ahaha! I, I’m a bit older than I look, so you don’t have to flatter me that much.”

“…You look young.”

After exchanging a few greetings, we got down to business.

“You want to sign a CDS contract on Soviet companies and government bonds this time.”

“Yes, there was talk about risk management within Daeha Securities. As you know…, it’s unstable, isn’t it? I feel it even more when I come here. If you don’t bribe corrupt officials… things don’t work out…”

“Hmm, you’re unique. I thought it was quite a bold company. In fact, didn’t you take more short positions than long positions in CDS?”

“That’s Daeha Investment Bank… right? Ahah, there are such strange circumstances. It’s true that the Soviet Union is corrupt, but our Korea is not exactly an advanced country either… It came from the top of the group. It’s not my money or my subordinates’ money, but it’s the superiors’ money, so I have to manage it well.”

“Ah, I see what you mean. I used to have such… misconceptions before I gained enlightenment.”

I couldn’t help but stifle a laugh at those words.

‘What? Realizing that no one would know even if you blew away the money given to you by your superiors through speculation…?’

I barely managed to keep my smile and responded with a laugh.

“Well… there are all kinds of things in the world.”

Hmm.

After talking a bit, unlike Yuri Tchevri-something, Nick Leeson was quite a pleasant fellow. He had a knack for making even offensive words fun.

Actually, he’s not really a remarkable person other than that, so he should at least be good at talking.

The fact that he was appointed as the head of Barings Bank’s Singapore branch at a young age, despite his bad family + bad education + no experience combo, shows how great a con man he is.

He’s even committed several financial crimes that would land him in jail immediately if caught, yet he’s talking to me calmly.

‘He must be quite anxious right now.’

As if to prove my prediction, he was consistently consistent in his attitude towards the contract, despite his relaxed atmosphere.

“Wouldn’t you like to take this contract a little more?”

“Oh, I don’t have the authority to do that. I’m sorry.”

He generally tried to extort more money by making more contracts.

“The premium transaction money… shall we do it in dollars?”

“Yes? No. Let’s do it in yen. I deal with the Nikkei Index.”

He preferred yen.

And the crucial point is…

“Miss, and as you know…”

“Secret, right? Yes, yes, don’t worry. No one else would think to come all the way to the Soviet Union to trade.”

He was trying to hide his position.

***

After finishing the deal with Nick Leeson, I lay in the hotel room and carefully examined the contract.

‘The money I have to pay for this contract is about 10 million dollars…’

It’s a fairly large amount to use as a hedge. Leeson might think that I’m playing tricks for the slush fund inside Daeha Group.

Leeson’s method of fraud was, as I said, using the 88888 account.

He moved the losses from futures trading to a specially created account and then reported only the gains to his superiors.

But here, a question may arise. Then, is the Singapore Mercantile Exchange (SIMEX), which manages that account, just watching?

Of course not.

SIMEX demanded margin every day, and Nick Leeson had to pay that margin in yen. And that margin had to come from a place that Barings Bank headquarters didn’t know about.

In the original history, Nick Leeson takes a short straddle position (selling call options and put options with the same strike price at the same time) enough to offset the loss and puts the premium earned into the 88888 account.

Then what happens, in terms of the balance sheet, the loss and profit are the same, so the loss is completely offset.

It’s a brilliant method. In this way, SIMEX and Barings headquarters, which only receive the books, cannot detect Nick Leeson’s losses.

Of course, the system of blindly believing the information sent only by receiving the books was quite idiotic… but whatever.

Even the audit team that came to the scene was deceived by Nick Leeson, the greatest genius who even blasphemes God.

How did I know? Conversely, I checked Nick Leeson’s option selling volume and then backtracked the loss. If the loss and the option premium are the same, the premium of the option sold by Nick Leeson is the loss.

But there is the most important problem here.

-Then, if he hadn’t traded futures in the first place and only sold options, wouldn’t he have just left the amount of the loss?

That’s right. If the act of deceiving the balance sheet continued, if it could… Nixon would be a legendary investor who just hedged well, not a con man.

But what do you think is the reason why a short straddle is a dangerous position? It’s because you’ll be screwed if you get it wrong.

Moreover, a straddle selling position is not very good at hedging risk. It’s because you lose money whether the index goes up or down.

On top of that, for some reason, Nick Leeson used enormous leverage to trade, so the losses written in the 88888 account gradually increased and became too large to be covered by the option premium.

‘It’s a bit different now, though.’

Now he had another means, the CDS contract.

What does that mean? It means he has more ways to pull risks.

Unlike the short straddle position, it’s safer (relatively speaking) and it’s a different item, so there’s less worry about getting caught…, and above all, the option selling position that has grown too large has become too heavy.

It means that there are fewer people receiving it in the market. It is said that liquidity has decreased in technical terms. It’s similar to the fact that even if I give $10 billion, if there is no one to pay for it, I can’t spend that money.

So… Leeson had no choice but to accept this suspicious contract.

“Yeonha, do you know how much this contract is worth?”

-Flutter.

I smiled brightly and shook the contract. Choi Yeonha looked at the piece of paper with anxious eyes.

“…Didn’t you say it was 10 million dollars?”

That’s the premium I have to pay.

But… I saw the future a little, and the Soviet Union collapses?

A little early.

“No. It’s worth 200 million dollars. Since the premium is 5%…, the money that dear Mr. Leeson has to pay is 200 million dollars.”

[If the Soviet Union is dissolved, it is judged that there is no one to repay the Soviet government bonds, so it is considered the same as a national bankruptcy. The deadline is December 31, 1991.]

Such words were clearly written on a small corner of the contract.

***

After finishing the secret meeting with Nick Leeson, I looked for Mr. Tchebrikov again.

“…First of all. I use the surname Tchebrikov, but I’m not closely related to him. Please know that.”

“Then the fact that your uncle works at the KGB…”

“Ah, my uncle is a different person. My uncle is still working at the KGB… he’s a colonel now.”

Ah, I see.

“Hmm, then who is that person…? I don’t know much about people from the Soviet Union.”

“Ah, I thought you knew. Well, you might not know since you came from a place not closely related to the KGB. Viktor Mikhailovich Tchebrikov…, do you know if you do?”

…Ah.

He was a big shot.

Isn’t he the chairman of the KGB who was replaced two years ago because he clashed with the current secretary general? I saw it in the news a few times, but Russian names are complicated, so it took me a while to recall. The pronunciation is a bit different from what I expected.

Right now, Mr. Vladimir is the main focus, so sometimes I get confused about the priority.

Anyway, if he’s the chairman of the KGB…, he’s a huge big shot. Of course, he’s retired now, and the person I’m meeting is a distant relative of that person, but still, where is the connection?

-Clink.

I opened the door of a mansion that was not large but very luxurious.

“Woof! Woof!”

‘Oh, it’s a dog.’

A dog with a strong Russian feel greeted Yuri Tchebrikov. I think the breed was Alaskan Malamute.

He stroked the dog for a moment and smiled at me, who stepped back slightly.

“He’s used to people, so he’s safe.”

“Hmm… he’s cute. Belka, come here.”

Yuri intervened awkwardly from the side.

“…This friend’s name is not Belka.”

I lightly ignored him and played with Belka’s head for a while.

Yes, yes, cute.

Should I raise a dog later?

A well-behaved friend.