How John Rusnak Lost $691M in a Bank Fraud

How John Rusnak Lost $691M in a Bank Fraud


In the early 1990s, Allfirst Bank sought to enhance its forex (FX) operations by appointing a skilled currency trader, John Rusnak. Rusnak, known for his success in foreign currency trading at Fidelity and Chemical Bank, possessed expertise in matching options with forward contracts to mitigate risks.

Rusnak's outlook on the yen was optimistic. Convinced that the yen had already absorbed the impact of the Japanese bubble burst, he anticipated a consistent yen appreciation against the dollar. In such circumstances, a trader would typically purchase forward contracts to obtain yen below market value while safeguarding the position through a combination of put and call options. Remarkably, Rusnak's bullish stance on the yen made him overlook the necessity of hedging his forward contracts.

Fortune initially favored Rusnak until a series of policy changes triggered a crisis within the Asian market. Consequently, the value of the yen and other Asian currencies experienced a prolonged decline, leaving Rusnak exposed to significant risks and challenges.

Rusnak Conceals His Forex Losses

Amidst mounting losses in his unhedged positions, John Rusnak resorted to desperate measures to conceal the truth. He manipulated the system by inputting false options, creating an illusion of hedged positions that prevented the bank from uncovering his losses. Exploiting the situation, Rusnak convinced his superiors to grant him a prime brokerage account, typically reserved for high-profile traders and hedge funds with substantial capital. Unbeknownst to them, Rusnak was already operating at a loss.

With the newfound account, Rusnak escalated the size of his trades, employing options and a forex contract called a historical rate rollover to camouflage his losses while increasing his bets on the yen. Consequently, the overall value of Allfirst's forex operations grew, although the losses remained largely undetectable. As the bank pressed Rusnak to release some capital to alleviate the heavy forex market imbalance on its balance sheet, the entire facade collapsed like a house of cards.

Revealing a staggering loss of $691 million, Rusnak's positions sent shockwaves through Allfirst and its parent bank, Allied Irish. The hope that Rusnak might be part of a grand scheme to defraud the bank for personal gain was shattered when it became evident that he had not earned anything beyond his regular salary and bonuses.

Cooperating with the FBI, Rusnak disclosed the methods he had employed to circumvent the bank's lax regulations, further highlighting Allfirst's culpability in the scandal. Shareholders held the bank accountable, leading to a sharp decline in Allied Irish's stock. Nonetheless, the bank demonstrated greater resilience compared to Barings Bank following the Nick Leeson scandal.

Subsequently, John Rusnak faced the consequences of his actions and received a seven-and-a-half-year prison sentence.


John Rusnak's appointment as a currency trader at Allfirst Bank aimed to enhance forex operations but led to a disastrous outcome. His failure to hedge positions and optimistic view on the yen left him exposed to losses amidst the Asian market crisis. To conceal these losses, Rusnak manipulated the system, obtained a prime brokerage account, and used complex forex contracts. The revelation of a staggering $691 million loss exposed Allfirst's lax oversight and policies. Shareholders held the bank accountable, leading to a decline in Allied Irish's stock value. Rusnak cooperated with the FBI, highlighting the bank's regulatory shortcomings, and received a seven-and-a-half-year prison sentence.

Bank Fraud
John Rusnak
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