Losing 3 Billion Yen in one month without doing any homework?

"Tycoon sues Goldman Sachs over $38M (almost RM 100 million) loss", article in The Straits Times of today. The article is behind a pay wall, but it can be found here.

Mr Oei said he bet on May 15 that the yen would fall against the Brazilian real.
....
On June 17, Mr Oei closed the trades, suffering a loss of 4.231 billion yen. However, he received 1.055 billion yen as premiums on the trades which was deducted against his losses. That left him in the red by 3.175 billion yen - the sum he is claiming.
....
According to Mr Oei, Mr Dewitte had said that the real was anchored to the US dollar in the same way that the Hong Kong dollar is pegged to the greenback. Mr Oei was also supposedly told that real-yen trades were liquid and could be executed any time, and that they behaved very similarly to US dollar-yen trades.


The hunger for yield (all caused by the reckless money printing tactics of the FED and other central banks) has driven many into schemes they should not have gone into. Schemes that are not transparent, have possibly high commissions and are very difficult (if not impossible) to calculate by a layman.

It appears that Mr Oei Hong Leong is also one of those persons, albeit at a massive scale. He made speculative currency bets, based on certain assumptions provided to him, and it appears he didn't bother to independently check these assumptions himself. Quite unbelievable, given the scale. Even more so, since it seems this wasn't the first time for him:


"In 2009, Mr Oei sued Citigroup's private banking arm for alleged negligence and misrepresentation after an estimated loss of $1 billion on foreign exchange and US Treasury bond transactions in 2008. The case was settled out of court."


Mr Oei is one of the richest men in SE Asia, number 33 in the list of Forbes.

More about his father can be found on Wikipedia.

And with which bank did Mr Oei trade? None other than Goldman Sachs, which we featured here.

I would not be surprised if it turns out that it was Goldman Sachs themselves who were on the other side of this currency trade, it looks like they are allowed to do so, as detailed in this document.

Some excerpts (emphasis mine):

When I read the above, I find it astonishing that anyone in his or her right mind would want to deal with such a company.

But I guess I am very wrong since Goldman Sachs' business is brisk, it is one of the largest banking giants on the world.