Yasuo Hamanaka, the lead copper trader for Sumitomo, attempted to corner the copper market in a classic market manipulation strategy. Because the copper market was relatively small, Hamanaka has the potential to control it and to corner it.
He essentially established a dominant long position in future contracts and simultaneously purchased large quantities of physical copper. As the futures contracts approached delivery, the party with the short position would find little physical copper available for delivery and would be forced to either pay a large premium for physical copper or unwind its short position by taking an offsetting futures position. Either way, the price of copper and / or copper futures prices would rise and create handsome profits for Hamanaka and Sumitomo.
Required
Discuss the factors that led to huge losses and describe measures that could have prevented those losses.