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October 7, 2008 11:42:50 PM CDT

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SocGen Fraud: How Did One Man Lose $7B?

Posted Jan 24, 08 9:12 AM CST in World,  Business 

(Newser) – Société Générale has not named the trader responsible for the largest bank fraud in history—which caused the bank to announce a $7.16 billion writedown today—but the Telegraph reports that his responsibilities were modest. He took out "plain vanilla" futures on the European equities markets, betting against other traders to hedge risk. Instead he started to buy his own positions, then constructing fictional transactions to hide losses.

Normally traders with such a small remit have strict limits on the amount they can trade, but SocGen suspects his experience with the bank's security system allowed him to override them. The trader, based in the Paris office, had intimate knowledge of the bank's computer system because he was initially employed in an administrative role. SocGen has indicated the trader's supervisors will be asked to leave the bank.

Sources: Daily Telegraph (UK), AFP, Daily Mail (UK)

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Pedestrians walk past a branch office of French bank Societe Generale, Thursday, Jan. 24, 2008 in Paris. French bank Societe Generale said Thursday it has uncovered a euro4.9 billion (US$7.14 billion)...   (Associated Press)
Pedestrians walk past a branch office of French bank Societe Generale, Thursday, Jan. 24, 2008 in Paris. Societe Generale said Thursday it has uncovered a euro4.9 billion (USD7.14 billion) fraud, one...   (Associated Press)
Pedestrians walk past a branch office of French bank Societe Generale, Thursday, Jan. 24, 2008 in Paris. Societe Generale said Thursday it has uncovered a euro4.9 billion (USD7.14 billion) fraud, one...   (Associated Press)
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