A currency trader suspected of defrauding Ireland's biggest bank of US$750 million voluntarily met with prosecutors and the FBI, his lawyer said, as bank executives expressed amazement that someone could pull off such a large scam.
John Rusnak, 37, was not charged and his lawyer said he is cooperating with authorities. Rusnak is in Baltimore, but avoiding his home because of the large contingent of media camped outside it, lawyer Bruce Lamdin said.
"My client is not a fugitive,'' he said. ``We hope that things will take their natural course from here. That's up to the US attorney's office."
Rusnak is suspected of defrauding Allfirst, the US subsidiary of Allied Irish Banks, in what could be the largest rogue-trading scam since the mid-1990s. The news sent Allied Irish and other European financial stocks tumbling amid security worries.
"We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage," Allied Irish chief executive Michael Buckley said in Dublin. "The investigation now under way will determine not only how it arose but also how we can guard against any recurrence."
Officials at the US attorney's office said they were investigating Rusnak and the FBI confirmed that it was looking into missing money at Allfirst.
Middle managers had confronted the trader by telephone last weekend when the magnitude of the phony options deals was discovered after several weeks of investigation.
Allied Irish's director for finance and risk, Gary Kennedy, said "alarm bells went off" when the trader didn't return calls Sunday night, then didn't arrive for work Monday morning.
Buckley said it was not clear whether Rusnak pocketed some or all of the missing money.
Five treasury workers at the bank have been suspended, including Rusnak. Allied Irish said people outside the bank may also have been involved.
The bank said the scam involved forged purchasing records for options contracts, starting early last year and ending just after Christmas.
Currency dealers normally buy options contracts to hedge their bets on whether a specific currency will gain or lose value. If they buy a currency that loses value, the bank's losses would typically be offset by an option contract bet on a movement in the opposite direction.
But in this case, the bank said, Rusnak did not buy options contracts to hedge many of his foreign-exchange deals. It said he forged records of options purchases, either to conceal losses or skim the fees paid for the options.
Analysts said the amount of the missing funds suggested the trader had bought phony contracts with a value of at least 1,000 times that amount, or US$750 billion. This is a huge sum for a bank largely involved in retail banking, not capital markets.
"How could such a large volume of activity be missed to create such a large profit? I don't know. It does seem bizarre," said John Kelly, an analyst at NCB Stockbrokers in Dublin.
Bank officials described Rusnak as a married father of two who has worked at Allfirst since 1993. They said he was paid US$85,000 a year, a modest amount for a currency trader with his experience.
The case has stirred memories of Nick Leeson, the Singapore trader who destroyed Barings Bank by piling up US$1.4 billion in concealed losses. The case prompted banks worldwide to tighten internal checks and balances.
AIB's group treasurer, Pat Ryan, offered reassurances that the currency fraud won't affect customer deposits or the bank's financial health.
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