The postdocs who lost millions

November 19, 1999

David Seetapun and Andrew Felce gave up glittering university careers to trade for huge salaries at leading investment banks. Both lost their jobs as a result of trading losses.

British-born Felce moved first. In 1992, he completed a PhD in string theory at Princeton University and became a postdoc at the University of California, Santa Barbara. Both institutions boast top physics departments and Felce was expected to quickly break new ground in his subject. Instead, in 1994, he left UCSB for an option traders' desk at Bankers Trust.

Even more was expected of David Seetapun, who gained a PhD in mathematical logic at the University of California, Berkeley, in 1995. Seetapun's adviser Ted Slaman says: "In his identity as a mathematical logician, David is brilliant. Our joint paper includes his ingenious solution to a well known and notoriously difficult problem and a perfectly routine calculation of mine. I wrote it to make his theorem available to the rest of the mathematical community."

In early 1996, Seetapun left Berkeley for the bank Credit Suisse. A few months later, he and Felce were headhunted by the London branch of investment firm Goldman Sachs. They specialised in trading options linked to interest rates. Mathematical wizardry was needed to handle these instruments, which involved not a single underlying asset such as a share price, but a continuous curve of interest rates with differing maturities.

Seetapun headed an aggressive proprietary trading venture intended to compete directly with the likes of LTCM. His reputation was widespread, and in March 1998, he was headhunted back to Credit Suisse. He was earning $1 million a year including bonuses. At Goldman Sachs, Felce took over Seetapun's old trading positions.

In September 1998, everything fell apart for Seetapun. The models stopped working, and he lost almost $100 million, before he was finally dismissed. Felce's dismissal came in August 1999, during another bout of market turmoil.

Goldman Sachs has admitted losing $20 million on Felce's trades, although traders at rival firms insist that the true figure is higher.

Felce is now unemployed and living in London. Friends say Seetapun left London for Las Vegas, where he played the blackjack tables. Next he moved to Florida, where he has the dangerous job of a crewman on a deep-sea swordfish boat.

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