French Bank Loses $7.1 Billion to Rogue Trader

January 24, 2008 08:30 AM
by findingDulcinea Staff
Société Générale, France’s second largest bank, has discovered that a single futures trader committed a “massive” fraud. The trader concealed the money using “sophisticated and varied techniques.”

30-Second Summary

In a letter to the bank’s customers, SocGen Chief Executive Daniel Bouton’s wrote, “The transactions which involved the fraud were simple—taking a position on shares rising—but hidden using extremely sophisticated and varied techniques.”

On confessing to the fraud, the trader was dismissed. His direct supervisor will go as well, writes the Dow Jones MarketWatch. The BBC describes the dismissal of a number managers.

The board of directors rejected CEO Bouton’s offer to resign.

SocGen also announced a loss of €2.05 billion related to sub-prime mortgage debt. When its shares resumed trading this morning, after a brief suspension following the news, they were down 3.6 percent.

Commentators are describing this as one of the largest cases of bank fraud ever.

The comparison being made everywhere is to Nick Leeson, the rogue trader who brought down Barings Bank in 1995, having lost it around $1.4 billion. Even adjusting that figure for inflation, the SocGen fraud “dwarfs” Barings’ losses, writes MarketWatch.

Headline Links: The rogue trader at SocGen

Opinion & Analysis: The mood at Davos

Historical Context: Nick Leeson at Barings; John Rusnak at Allfirst


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