Flaming Ferraris

THREE FORMER Credit Suisse First Boston (CSFB) employees, known as the Flaming Ferraris for a cocktail they used to drink, were barred from securities trading, after an inquiry into an attempt to manipulate the Swedish OMX index in 1998. The men were part of a team which boasted of being the world's most successful share traders, making more than £100 million ($170 million) for their employers, the CSFB investment bank.

The team included David Crisanti, a Princeton graduate in economics; Adrian Ezra, a Harvard-educated squash champion; and ex-Etonian James Archer, who studied chemistry at Oxford. The latter was reported to earn £250,000 ($426,000) a year. Team bonuses were counted in millions. They enjoyed the best food and drink. It was at a fashionable London venue, the Nam Long Vietnamese restaurant, that they got their nicknames because of their penchant for £14-a-glass ($24) Flaming Ferrari cocktails.

The trio's downfall came in 1999, when they were suspected of dubious dealings in shares of Swedish papermaker Stora. They were accused of forcing movements in the Stockholm shares index which triggered windfall profits of around £400,000 ($682,000) on bets and futures deals they had placed. Archer said his finger had slipped on his computer keyboard and he had sold a million shares when the meant to sell 100,000. The team that specialized in equity arbitrage—the exploitation of differences between different stock-market indices—hit the headlines in December 1998 when they were touted as having made money on all but 12 days in 1998, an astonishing achievement given the economic turmoil of that year.

The Swedish stock exchange fined CSFB two million Swedish kronor ($242,000) for an attempt to manipulate the Swedish stock-market index in the final days of 1998. Swedish brokerage firm Nordiska Fondkomission was fined 1 million kronor for its role.

[Page 325]Archer, Ezra and Crisanti each were employed by Credit Suisse First Boston (Europe) Ltd. Crisanti was global head of Index Arbitrage. Ezra was a vice president in Equity Index Arbitrage responsible for European Index Arbitrage, including the Swedish book. He reported to Crisanti. Archer was a junior trader on the index arbitrage desk, responsible for trading the Swedish book. He reported to, and sat next to, Ezra. The three were close friends. They were found guilty of “a blatant attempt to manipulate the OMX Index on the SSE on the morning of December 29, 1998, and of persistent attempts to disguise the circumstances from SSE Market Surveillance and from CSFB's compliance department.”

The three were dismissed by CSFB. Nordiska Fondkommission also fired the broker involved. The exchange's disciplinary committee ruled that the trades took place without the consent or information of the two firms' management. Nevertheless, the companies are considered responsible for the actions of their employees under Swedish law.