Financial Forensics: The Due Diligence Files

About Financial Forensics: The Due Diligence Files

Forensic dissection of capital markets collapses. Not headlines — mechanisms. How money moved. Where structures broke. T1 — Full autopsy. The collapse, the actors, the moment nobody stopped it. T2 — GP/LP room. 3 red flags in the documents. Due diligence questions. Active parallels in deals running today. For allocators, GPs, and fund professionals. Hosted by Sergio Stieben — 15 years in GP/LP relations, cross-border finance US-LatAm-Europe. Try FFL Trial, free — run a deal through the same engine, scored against 140 documented collapses: https://financialforensicslabs.com.ar

Publisher

Sergio Stieben

Category

business

Language

en

Explicit

No

First episode

20 Apr 2026

Latest episode

8 Oct 2026

Latest episodes

342 episodes in the feed.

1. 

   8 Oct 2026

   Sumitomo 1996: Mr. Five Percent Hid a Decade of Losses │File 170 T1

   This episode is part of Financial Forensics Labs — two shows, one forensic methodology: The Due Diligence Files traces how institutions collapse, The Signal Files traces how the good calls get made. Built from primary-record research by a 15-year capital markets professional. Get to know the framework, the other show, and the tools built from it — all in one place. Explore ⁠⁠⁠⁠⁠⁠⁠⁠⁠Financial Forensics Labs — Forensic Finance Intelligence⁠⁠⁠⁠ (https://www.financialforensicslabs.com.ar/) Sumitomo Copper Scandal 1996: how one trader at one of Japan's largest trading houses hid unauthorized losses for roughly a decade, then tried to win them back by cornering 93% of the copper warrants on the London Metal Exchange, a position justified by a circular physical flow that netted to zero. This is the financial autopsy of the Sumitomo copper scandal. In 1985, Yasuo Hamanaka and his superior began speculating without authorization on LME copper forward contracts to recover an earlier loss on physical copper trading in the Philippines. The losses reached around $60 million, the superior resigned, and Hamanaka told no one. He kept a secret book of unauthorized trades, destroyed documents, lied to supervisors, and forged data and signatures. The company promoted him to head copper trader the following year. The market came to know him as Mr. Copper and Mr. Five Percent, for the share of the world's yearly copper supply he was said to control. We trace how a hidden loss turned into a corner. Hamanaka ran monthly deals with a small trading firm that bought copper warrants from a Zambian producer, sold them to Sumitomo, and watched Sumitomo sell the same copper back to the same producer, month after month. On paper, that looked like a real copper business needing a hedge. In reality, the metal went around in a circle. Behind that cover, he built roughly two million tonnes of futures and nearly half of all LME warrants by September 1995, and 93% of them by late November. Anyone who had sold copper short and could not deliver had to buy back from him at his price. The money came from more than a dozen LME brokers that had each extended roughly $150 million of credit on the strength of the Sumitomo name, and from large American banks, some of it structured as loans tied to copper. Sumitomo was not an exchange member, it traded through brokers, and the LME had no mandatory reporting of large positions. A trading firm that refused to put its letterhead on hundreds of millions of dollars of non-existent trades complained to the exchange as early as 1991, and nothing happened. American regulators noticed copper draining from New York warehouses into the LME's new Long Beach warehouse, but an investigation did not open until April 1996. In June 1996, Sumitomo announced $1.8 billion in losses, later reaching $2.6 billion. Copper fell from about $2,800 a tonne in May to about $1,800 by late June. A Tokyo court sentenced Hamanaka to eight years for forgery and fraud. He was never convicted of manipulation, though Sumitomo paid $150 million to the American commodities regulator to settle manipulation charges and later recovered $275 million from Merrill Lynch. The LME rewrote its rules on membership and large-position reporting. This episode is Part 1 (T1) of the Sumitomo Copper file, the narrative account for a general audience. Part 2 (T2) breaks down the GP/LP institutional layer: the exact mechanism, the three pieces of arithmetic sitting in public data and credit files, and the active due diligence framework for anyone allocating capital or credit against a desk whose results only the desk can explain. Financial Forensics Labs dissects the world's biggest financial collapses, fraud cases, and institutional failures — layer by layer, case by case. Keywords: Sumitomo copper scandal, Yasuo Hamanaka, Mr Copper, Mr Five Percent, Sumitomo Corporation, London Metal Exchange, LME copper, copper market corner, rogue trader case study, unauthorized trading, copper warrants, Global

2. 

   8 Oct 2026

   Sumitomo 1996: A Hedge Netting to Zero │GP/LP - 3 Red Flags│File 170 T2

   This episode is part of Financial Forensics Labs — two shows, one forensic methodology: The Due Diligence Files traces how institutions collapse, The Signal Files traces how the good calls get made. Built from primary-record research by a 15-year capital markets professional. Get to know the framework, the other show, and the tools built from it — all in one place. Explore ⁠⁠⁠⁠⁠⁠⁠⁠⁠Financial Forensics Labs — Forensic Finance Intelligence⁠⁠⁠⁠ (https://www.financialforensicslabs.com.ar/) Sumitomo Copper Scandal 1996: the GP/LP institutional analysis of how a concealed loss becomes a corner, why the only way to recover a loss nobody knows about is a bigger position nobody knows about, and why a position only counts as a hedge if something real sits on the other side of it. This is the deep-dive institutional layer of the Sumitomo Copper file. We break down the exact mechanism by which Yasuo Hamanaka, head of copper trading at Sumitomo Corporation, turned unauthorized losses hidden since 1985 into a position controlling 93% of the warrants on the London Metal Exchange by November 1995. The logic was fixed from the start: a loss that cannot be reported cannot be written off, so it can only be recovered, which requires a bigger position, which requires financing, which requires a story. The story was a commercial flow with a Zambian producer that gave the appearance of a large physical copper business and a justification for enormous futures positions as supposed hedges. We isolate three pieces of arithmetic that anyone could have done with public data or with their own credit files. First, the warehouse arithmetic: in a market where spot copper trades above forward prices, metal normally leaves warehouses. In New York it did, while on the LME stocks kept arriving, especially at the new Long Beach warehouse. Second, the credit arithmetic: more than a dozen LME brokers had each extended roughly $150 million to the same client on the strength of the parent's name, on the order of $2 billion, before hundreds of millions more from large American banks. Each lender saw a normal-looking line, and only the sum was alarming. Third, the circular flow: add up the physical copper in the Zambian loop and net consumption at the end of every cycle is zero, yet the paperwork justified futures positions measured in millions of tonnes. We connect the case to the LME's later nickel crisis, the same exchange with the same blind spot: Sumitomo was not a member, traded through brokers, and there was no mandatory reporting of large positions, so the firm, the brokers, and the exchange each saw a piece and none was obliged to add the pieces together. We also cover the aftermath: $1.8 billion announced in June 1996 and $2.6 billion in final losses, the eight-year sentence for forgery and fraud with no manipulation conviction, and the recoveries from Merrill Lynch, J.P. Morgan, and UBS. Plus a complete active due diligence framework for allocators, credit officers, and internal audit teams: how to net out a hedge against its verifiable underlying exposure, how to sum credit across lenders, and how to separate the person who produces a result from the person who records it. This episode is Part 2 (T2) of the Sumitomo Copper file, the GP/LP analytical layer for institutional listeners. Part 1 (T1) is the narrative account for a general audience, on the same feed. Financial Forensics Labs dissects the world's biggest financial collapses, fraud cases, and institutional failures — layer by layer, case by case. Keywords: Sumitomo copper scandal, Yasuo Hamanaka, Mr Copper, Mr Five Percent, Sumitomo Corporation, London Metal Exchange, LME copper, copper market corner, rogue trader case study, unauthorized trading, copper warrants, Global Minerals, Zambia copper, Merrill Lynch Sumitomo, CFTC manipulation settlement, 1996 trading scandal, hidden trading losses, key person risk, internal control failure, hedge ver

3. 

   26 Sept 2026

   LME Nickel 2022: Clearing Blind Spot │GP/LP - 3 Red Flags│File 169 T2

   This episode is part of Financial Forensics Labs — two shows, one forensic methodology: The Due Diligence Files traces how institutions collapse, The Signal Files traces how the good calls get made. Built from primary-record research by a 15-year capital markets professional. Get to know the framework, the other show, and the tools built from it — all in one place. Explore ⁠⁠⁠⁠⁠⁠⁠⁠Financial Forensics Labs — Forensic Finance Intelligence⁠⁠⁠⁠ (https://www.financialforensicslabs.com.ar/) LME Nickel Short Squeeze 2022: the GP/LP institutional analysis of how central clearing removes one kind of risk between individual traders while quietly relocating a different kind of risk — the aggregate size of one underlying position — to a place almost nobody is actually watching. This is the deep-dive institutional layer of the LME Nickel file. We break down exactly how Tsingshan Holding Group's nickel short position, split deliberately across roughly ten separate clearing brokers, grew large enough that no single counterparty — including the London Metal Exchange itself — could see the true aggregate size until the morning it broke the market on March 8, 2022. We explain why a central clearinghouse eliminates bilateral counterparty risk but does nothing, by design, to catch a single client's exposure ballooning across multiple member firms, and why honoring that morning's margin calls at market prices would have required collecting close to $20 billion from 28 banks in a single day, more than ten times the exchange's previous record. We walk through three unasked questions that existed before the crisis: what tonnage separates a genuine hedge from a directional bet on a producer's own physical output; why the LME chair's request for an update on the position the evening before did not trigger an adequate response; and why LME staff, asked directly by the UK's financial regulator that same morning what was driving the price, never raised the possibility of a short squeeze at all. We also cover the aftermath in detail: the standstill agreement a bank consortium gave Tsingshan instead of forcing default, the Elliott Management and Jane Street lawsuits seeking a combined $472 million in damages, and the UK courts' rulings — from the High Court in November 2023 through the Court of Appeal in October 2024 and the Supreme Court's refusal to hear a further appeal in January 2025 — all confirming the exchange acted lawfully in cancelling trades to prevent a systemic "death spiral." Plus a complete active due diligence framework for risk managers at clearing members, trading firms, and treasury desks who treat an exchange's own systems as a full backstop against counterparty concentration risk, rather than something to verify independently — including how to recompute what a genuine hedge should be sized at for a producer's actual physical output, and how to build an explicit view, before any crisis, of what an exchange is likely to do once a single day's margin call would exceed its own default-fund capacity. This episode is Part 2 (T2) of the LME Nickel file, the GP/LP analytical layer for institutional listeners. Part 1 (T1) is the narrative account for a general audience, on the same feed. Financial Forensics Labs dissects the world's biggest financial collapses, fraud cases, and institutional failures — layer by layer, case by case. Keywords: LME nickel short squeeze, London Metal Exchange, Tsingshan Holding Group, Xiang Guangda, nickel price spike 2022, commodity exchange crisis, short squeeze case study, margin call cascade, central clearing risk, Elliott Management lawsuit, Jane Street LME, exchange trade cancellation, clearinghouse default risk, commodity market structure, producer hedge risk, counterparty concentration risk, systemic risk signal, financial forensics, market structure failure, LME Clear, Russia Ukraine commodity shock, nickel market volatility, exchange governance failure, institutional due diligence, risk management framework, Financial Forensics Labs