Jerome Kerviel Crushes Bank Societe Generale (Part9)

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In one of the banking world's most unsettling recent disclosures, France's Société Générale SA said Mr. Kerviel had cost the bank €4.9 billion, equal to $7.2 billion, by making huge unauthorized trades that he hid for months by hacking into computers. The combined trading positions he built up over recent months, say people close to the situation, totaled some €50 billion, or $73 billion.
Jerome Kerviel
The loss -- dwarfing the $1.3 billion Nick Leeson cost British bank Barings in 1995 -- has forced Société Générale to seek a capital infusion. It is expected to try to raise €5.5 billion, chiefly from its existing shareholders.
The loss exposes the latest breakdown of risk controls at a big international financial institution, along with U.S. banks that have hemorrhaged billions of dollars since the crisis in subprime mortgages developed last summer. Some analysts speculate that the French bank's frantic efforts to unwind the unauthorized trades over 72 hours may have contributed to the volatility and declines that rattled European markets on Monday.
In addition to the billions, Société Générale appeared for a time to have lost Mr. Kerviel as well. Executives at the bank, still stunned at the magnitude of the scandal, told reporters yesterday they hadn't kept track of his whereabouts since questioning him on Saturday.
[Image]
Former Barings futures trader Nick Leeson in November 1995.
Here's a look at stories in the Journal over the past decade on trades gone bad, and an accompanying photo gallery above.
• Behind a $550 Million Bad Bet: A Mystical Man With Ambition(CAO Singapore, 2004)
• Junior Staffers Cited for Stopping National Australia Bank Scandal(2003)
• Allied Irish Banks Say a Rogue Trader Lost $750 Million in Unauthorized Deals(2001-2002)
• Sumitomo Trading Scandal Still Haunts Copper Market(1996)
MORE

• Deal Journal:Who Are You, Jerome Kerviel?
• Daily Davos:Massive Trading Loss Is Talk of the Town

But an attorney at a law firm representing Mr. Kerviel said the trader had spent much of the week with his lawyer. Asked whether Mr. Kerviel rejects the banks' accusations, the lawyer said only: "He is not on the run. He is standing by to answer to justice. He spent the day at our office."

Early details, including accounts from executives at the French bank, paint a picture of an ordinary trader who used extraordinary means to game the bank's own system and hide massive unauthorized trades on stock-index futures. Even as bank executives were scrambling to deal with the trail of destruction, they were at a loss to describe his motivations. Société Générale executives said that the early investigation indicated the trader didn't earn a dime on his actions. They also said he appeared to be acting alone.



Mr. Kerviel essentially made bets on which way large European stocks would move, in one of the most liquid markets linked to equities globally. His expertise was trading futures tied to baskets of stocks such as the Euro Stoxx 50. In normal markets, some $40 billion to $50 billion of the futures of that index trade daily. The index gives traders such as pension and hedge funds quick access to a large swath of the European economy, by investing on the belief the index will rise or fall to a certain point in the future. Mr. Kerviel also made trades in Germany's DAX Index and France's CAC-40.

According to Mr. Bouton, the Société Générale chairman, Mr. Kerviel began conducting fraudulent trades sometime in 2007.

Category:

News & Politics

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• Jerome
• kerviel
• rogue
• trader
• Societe
• Generale
• nick
• leeson
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• market
• movers
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• society
• general
• fraud
• take
• ove

[iloveyouguada]

@MsMarat111 you say : "don't trust french system, SG is bullshit" ah ah ah ah! I'm ok with you, SG IS BULLSHIT! But SG is not THE ONLY ONE OK? greats banks in the world are BULLSHIT!! EVERYWHERE AROUND THE WORLD GREATS BANKS ARE BULLSHIT! OPEN YOURS EYES!!!!!! (sorry for my english, i'm not english!)

[DeusLeneIV]

Elle est charmante la journaliste américaine de CNBC :)

[PetitBerlingot]

I guess, there are some weird failures on S.G system. Apparently, JK was used.

Keep in mind, biggest part of the economic crisis began in U.S. Don't mix up those stories.

However, i believe S.G leaders let him use system breach for some mysterious reasons.

And MsMarat111; Banks are bullshit in general. Just taking others money to get what they want...It become horrible when nobody can controle the way they use the money.

Modern thief to finance electoral campaigns.

What a Sick Sad World.

[MsMarat111]

don't trust french system , SG is bullshit

[8data]

sorry for the silliness where is monsieur sarxozy

[cianodowd]

That french minister for finance is the biggest threat to Ireland's economy today, NO TO CORPORATE TAX HARMONISATION!!!

[daveextra]

what a load of nonsense, dumping all presently known toxic waste on jk's desk. even though you may not have uncovered it all yet madame lagarde, your covering up. you know that this is'nt true. one rogue trader ? total rubbish and you know it !

[tortex088]

pretty nice!

[8data]

how could they let ithappen

FINANCING

CHRISTINE LAGARD-you have moral hazard and hagaard

did she say monsieur lagard

americans, least sophisticated ever

nice interview, no wonder the froggies hate us

except for one frog-SARXO, YOU ROX BRO, SARXOZY!!!

[8data]

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