Nick Leason outdone, Societe Generale Uncovers Massive Fraud

Rogue trader to cost SocGen (Societé Génerale) $7bn … Really? Let’s see … one guy can let this amount disappear in a few weeks … even though they have tough checks in place :s

thanks for the posting, very bizarre, apprently he didnt take any funds. makes Taiwanese banks look positively safe – let’s hear it for having to use chops on every single transaction :rainbow:

Yea, I’ve been meaning to start a thread on this the past couple of days. Makes the guy who stole US$100M from Taiwan’s Lee & Li law firm (actually from their client) look like a petty thief. Of course the difference is the Lee & Li guy succeeded and pocketed the dough (and is still free today, years later).

This case has me totally baffled. They keep reporting that he caused US$7B losses but got no personal gain. WTF? Was he trying to profit and just screwed up that badly, or was he just messing with the system, interested in sabotage not profit? I can’t imagine why someone would want to cause such immense damages and face humongous criminal and civil penaltiies rather than simply stealing a few million, which he obviously should have been capable of.

The other thing that’s interesting is that, to cause damages of that magnitude, I read this morning, he must have been trading many times that amount. I forget the estimate I read, but maybe it was $45 or $50B they guessed he was trading. JEeeeezusss.

Anyway, it would seem the guy’s not a brilliant thief but a brilliant psycopath. To intentionally commit a crime of that massive magnitude, and cause those kinds of incredible damages just for kicks, that’s really bizarre. I’d guess anyone who knows him will testify he was always a little nutty.

After reading about his escapades I can imagine that a chimpanzee could do better trading … even I could do better … probably make a slight profit instead of losing billions …

You need to read his mentality, coming from middle office (or back office) to become a trader is something that mid/back office guys dream of. He wasn’t a star trader, he was handle simple stuff, so what’s his mentality? Not to fuck it up! just trying to keep the trading job.

Now since he knows the back office system, when he lost a few million, he is just going to book opposite trade to cancel them. You might ask why? Nothing more than job security at the start point, if you lose a few million (or tens of million, depends on your level), you will get escort out the trading floor right away (someone will pack your stuff for you).

So, if you lose, you hide your lose, hope to make a comeback, or even to impress your boss one day by taking bigger bets… well things never goes the way people want, so the end result is he just lost shit load of more money before risk management could stop him way earlier.

Anyway that’s my guess.

The truth isn’t known yet. Here’s a Reuters article from yesterday:

Jerome Kerviel: “genius” or mediocre backroom boy?

The article does not even attempt to answer the question posed by their headline. Instead it just points out that he may have been either of those two, or possibly a third option – a scapegoat. Obviously the bank is depicting him as a genius, because they don’t want to take too much heat for their lousy security and would rather claim it was a one in a billion circumstance of this fantastic genius who got lucky. Most likely, the guy who did it would also like to be portrayed as a genius. But, it will apparently take a little while for the truth to come out.

Oh, one other interesting note: apparently the $7 billion was lost in just 10 days. Yikes, he is bad. :astonished:

EDIT: I just read through the article at that second link and there does seem to be a fair amount of evidence that he was no big deal, was perfectly mediocre.

He’s a genius in losing money … that’s a fact :slight_smile:

Others have done substantially better at that, but they’re authorized by the company, so they’re rewarded for their massive losses.

[quote]UNDER the stewardship of Dow Kim and Thomas G. Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34 billion in write-downs last year. The debacle cost chief executives their jobs and brought two of the world’s premier financial institutions to their knees.

In any other industry, Mr. Kim and Mr. Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.

Mr. Maheras, who left his job as co-president of Citigroup’s investment bank this fall after being demoted, has had serious discussions with several investment banks, including Bear Stearns, about taking on a top management position, people who have been briefed on the situation said. And he has also been approached by investment firms willing to back him to the tune of $1 billion or more if he decides to start his own hedge fund. . .

Mr. Kim, who until this spring was a co-president at Merrill Lynch with oversight of the firm’s trading and market operations, has been crisscrossing the globe in recent months raising money for his new hedge fund, Diamond Lake Capital.

The ease with which Mr. Maheras and Mr. Kim have put themselves back in play is a reminder that for many top Wall Street executives, humiliation and defeat need not result in a professional exile. And they aren’t the only ones. Zoe Cruz, the Morgan Stanley co-president who was forced to leave her job after $10.8 billion in subprime losses, has been approached by investment banks, hedge funds and private equity funds about a senior management role. . . .

John Meriwether. Ousted from Salomon Brothers in 1991 for his role in a bond trading scandal, he became a co-founder of Long Term Capital Management, the hedge fund that nearly collapsed in 1998, rattling markets worldwide. He has since founded a second fund, JWM Partners, with assets of around $3 billion.

More recently, Brian Hunter, the energy trader at Amaranth Advisors whose disastrous bets led to the disintegration of that $9 billion hedge fund, is now advising a private equity fund called Peak Ridge on starting a hedge fund. Howard A. Rubin, a trader at Merrill Lynch, who lost $377 million in 1987, quickly landed a job at Bear Stearns, where he had a successful career. . . [/quote]
link

So, losing $7B is no biggie. With proper authority one can lose a lot more than that with impunity, just moving on to other employment. The problem with this guy was simply that he was too low in the organization.

[quote=“Mother Theresa”]

Anyway, it would seem the guy’s not a brilliant thief but a brilliant psycopath. To intentionally commit a crime of that massive magnitude, and cause those kinds of incredible damages just for kicks, that’s really bizarre. I’d guess anyone who knows him will testify he was always a little nutty.[/quote]

After reading something interesting in the Taipei Times blurb (well, AP blurb), I think the mentality has to be looked at. They said he ran for political office in his town.

I think he was looking for some notoriety. If sabotage was his goal, that is.

Looks like the trader was in it for personal gain after all - his bonus.

businessweek.com/globalbiz/c … _top+story

And the bank had prior “warning”:

They’ve uncovered the real reason. Overwork, aparently.

[quote]Market Pipeline: French trader forced to work 30 hours a week!
Friends of rogue trader Jerome Kerviel last night blamed his $7 billion losses
on unbearable levels of stress brought on by a punishing 30 hour week.

Kerviel was known to start work as early as nine in the morning and still be at
his desk at five or even five-thirty, often with just an hour and a half for
lunch.

One colleague said:
"He was, how you say, un workaholique. I have a family and a mistress so I
would leave the office at around 2pm at the latest, if I wasn’t on strike.

But Jerome was tied to that desk. One day I came back to the office at 3pm
because I had forgotten my stupid little hat and there he was, fast asleep on
the photocopier.

At first I assumed he had been having sex with it, but then I remembered he had
been working for almost six hours."

As the losses mounted, Kerviel tried to conceal his bad trades by covering them
with an intense red wine sauce, later switching to delicate pastry horns.

At one point he managed to dispose of dozens of tranactions by hiding them
inside vol-au-vent cases and staging a fake reception.

Last night a spokesman for Soc Gen said that Kerviel was overworked,
insisting he lost the money after betting that the French were about to stop
being rude, lazy, arrogant b*stards.[/quote]

Merde!

HG

Ok, the guy was just convicted, sentenced to 3 years in prison, and :roflmao: ordered to repay $7 billion.

online.wsj.com/article/SB1000142 … 62322.html

I like this part, too:

Gutsy fucker. Gotta give him credit for that.

And, I don’t know how he’ll get around that damned order to repay the $7 billion, but I wouldn’t be surprised if he somehow profits off the whole thing. After all it almost sounds and looks like a movie already.

What to put in your resume for a bank’s top management job?

I’m a respected big money loser and am therefor qualified for the top management job you’re offering!

Or, if you want to start a new hedge fund?

I’m known for losing big money, and I will do so in the future again but it won’t be yours or mine. This makes me the right person to run the new hedge fund.

Some relevant updates.

Thats a good lawyer.

‘Other people’s money’