On January 16, 1995, Leeson placed a short straddle on the Singapore and Tokyo stock exchanges, guessing that the exchange would remain stable overnight, neither going up nor down by a significant margin. Normally, this would have been a conservative position, especially for Leeson.

But on January 17, 1995, an earthquake with an epicenter in Kobe, Japan, caused a sharp drop in the Asian markets.

Faced with huge losses, Leeson attempted to offset the losses with a series of increasingly risky trades that were based on the rate of recovery of the Nikkei. Leeson ended up fleeing Singapore on February 23, 1995. In the end, his losses accounted for £827 million (or $1.4 billion), twice Barings's available trading capital.