Friday, January 25, 2008

Bank: Trader's fraud cost billions

Can't let this one go. Banque Société Générale of course.
French bank Societe Generale said Thursday it has uncovered a $7.14 billion fraud - one of history's biggest - by a single futures trader who fooled investors and overstepped his authority.

The fraud destabilized a major bank already exposed to the subprime crisis. France's second- largest bank by market value said it would be forced to seek $8.02 billion in new capital.

Trading in Societe Generale's shares, which have lost nearly half their value over the past six months, was suspended on the Paris bourse. It was unclear when trading would resume.

The bank said it detected the fraud at its French markets division the weekend of Jan. 19-20. In a statement announcing the discovery, it called the fraud "exceptional in its size and nature."

It said a trader at the futures desk had misled investors in 2007 and 2008 through a "scheme of elaborate fictitious transactions."

The trader, who was not named (since named Jerome Kerviel), used his knowledge of the group's security systems to conceal his fraudulent positions, a statement from the bank said.

The individual confessed to the fraud, the bank said, and was being dismissed [no shit! - ed]. His supervisors were to leave the group [why? -ed]. Chief Executive Daniel Bouton offered his resignation, but the board rejected it [rightly so - ed].

An analysis confirmed the "isolated and exceptional nature" of the fraud, the bank said.

The fraud appeared to be the largest ever by a single trader. If confirmed, it would far outstrip the Nick Leeson trading scandal in 1995 that bankrupted British bank Barings. Barings collapsed after Leeson, the bank's Singapore general manager of futures trading, lost $1.38 billion on Asian futures markets, wiping out the bank's cash reserves. The company had been in business for more than 230 years.

As always, I have to put in my 2¢.

First, its amazing the security standards were so lax this went undetected so long. That's why I don't know why his supervisors were dismissed. They determined security practices? Daniel Bouton did? I really doubt that.

Second, sometimes one person can make a difference. And a fucking big one. Damn, why didn't I go into banking?

Has anyone called Guinness? He may have just set a fucking record. Step aside Leeson. Your torch has been passed.

At least they might get a few kegs. That might help with the pain.

Yes, I do find humor in some very strange places and subjects.

No...can't go there. Its too dark and icky. But did you hear the one about...

Stop that!




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