Record $7B Rogue Trader Fraud Alleged at French Bank
Updated: An all-time record $7 billion fraud allegedly perpetrated on a renowned French bank by a rogue junior trader has left the Societe Generale reeling.
One of the country’s oldest and biggest banks, SocGen discovered over the weekend that it had been the victim of a “scheme of elaborate fictitious transactions” by a junior trader seeking to conceal bad bets, utilizing stock index futures, on the direction that the overall European stock market was taking, according to Reuters.
SocGen declined to give a name, “but three sources at the bank named him as Jerome Kerviel, 31, a trader on the bank’s award-winning equity derivatives desk earning less than 100,000 euros a year,” according to Reuters. SocGen told investors that the trader worked for a time in the bank’s back office, and this knowledge of its control systems allegedly helped him avoid detection. The bank says he has confessed and didn’t profit personally.
“If fraud is proved, the loss will be the biggest caused by a single trader, dwarfing the $1.4 billion loss by trader Nick Leeson that brought down British bank Barings in the 1990s,” the news agency writes.
The incident also casts doubt on the risk management systems at some banks, an expert notes.
Wall Street Journal (sub. req.): “Bank Says Trader’s Fraud Caused $7.2 Billion Loss “
Updated at 3:15 p.m. CT.
