A trader in the Baltimore office of Allied Irish Banks ( AIB) entered fictitious currency hedges that left the bank exposed to $750 million in losses, the company said in a release. The trader has since disappeared and the bank has suspended its currency trading operations at the U.S. unit, Allfirst, reported the incident to the FBI and suspended five employees as it investigates. "We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage," said Group Chief Executive Michael Buckley. "The investigation now underway will determine not only how it arose but also how we can guard against any recurrence. The Group's underlying business and profitability momentum is not impaired by this once-off blow. Our capital adequacy continues to be strong." According to the company, the trader entered into a series of spot and forward foreign exchange transactions that were real, but which were hedged by fictitious options positions. "From our initial investigation, it is clear that the foreign exchange deals were transacted in the normal manner. However, the offsetting currency option contracts were fictitious. They were artificially entered into the Allfirst systems," the bank said. Allied Irish said the loss will reduce its 2001 earnings by a one-time 596 million euros after taxes. Excluding that, the parent's profit amounted to 1.401 billion euros in 2001, while group profit attributable is 997 million euros. The incident is reminiscent of the $1.4 billion of hidden losses rung up by Singapore trader Nick Leeson in a scheme that eventually led to the downfall of Barings Bank in the mid-1990s, as well as a 1996 unauthorized copper trading scandal in which Sumitomo of Japan lost $2.6 billion.