'Rogue' AIB trader pleads guilty to fraud

Former currency trader John Rusnak has pleaded guilty to bank fraud over a trading scam that cost Allied Irish Banks (AIB) nearly $700m in trading losses.

Mr Rusnak managed to run-up losses of $692m over a five-year period while working at Allfirst Financial, a US subsidiary of AIB.

The incident ranked alongside the 1995 collapse of Barings bank at the hands of rogue trader Nick Leeson as one of the biggest scandals in banking history.

Mr Rusnak pleaded guilty to one count of bank fraud and agreed to a reduced sentence in return for helping the investigation into whether other people were involved in the scandal.

He has agreed to a prison sentence of seven-and-a-half years, followed by five years of probation.

If he had been found guilty after a trial he would have faced a maximum sentence of 30 years in prison and $1m in fines.

Complex trail

Mr Rusnak had pleaded not guilty to seven counts of fraud in June.

Prosecutors claimed that his activities helped him to earn salary and bonuses totalling $850,000 between 1997 and 2001, but said he did not profit from the alleged fraud directly.

Authorities said that the decision over whether Mr Rusnak will have to pay back Allfirst any of the money he gained will be made at a court hearing in January.

Mr Rusnak allegedly ran up the losses while trading the Japanese yen.

When the trades went against him he allegedly used fraudulent measures to cover up the losses.

Last month AIB agreed to sell Allfirst to the regional US bank M&T Corporation in a deal worth $3.1bn.

Under the terms of the deal, AIB will have a 22.5% stake in the resulting bank.