Second Largest Bank in France Hit by €5 Billion Fraud
January 24th, 2008Should we laugh? Should we call bullshit? Should we recoil in horror?
I’ve got it:
“With traders like this, who needs CDOs?”
Hee Hee Haar Haaaar
Via: Telegraph:
The French bank Société Générale stunned financial markets today by revealing that it had been the victim of one of the largest frauds by a rogue trader — losing four times as much as Nick Leeson, the man who sank Barings.
The second-biggest French bank said that it had lost €4.9 billion (£3.7 billion) as a result of the rogue trades by a Paris-based trader who concealed his positions through “a scheme of elaborate fictitious transactions”.
It said that it was in the process of dismissing the trader, who had “confessed to the fraud”. Some of his managers would also be leaving the company.
The fraud appears to be one of the biggest in history, dwarfing the £827 million lost by Mr Leeson, whose rogue trading led to the collapse of Barings in 1995.
SocGen described the fraud today as “exceptional in its size and nature”.
The trader, who has not been named, was in charge of trading what SocGen called “plain vanilla” European stock market index futures.
Plain vanilla is a phrase frequently used in the City to describe supposedly simple and straightforward securities, as distinct from more complex and esoteric investments.
Traders in index futures take bets on the future direction of share market indices such as the FTSE 100.
Normally, they are governed by strict trading limits to prevent catastrophic losses, or they hedge their overall exposure with offsetting bets.
SocGen said that the trader had breached his trading limits and had managed to conceal his losses because of his knowledge of the bank’s control systems gleaned from his previous job processing trades at the bank.
My only question is this: if the bank is in crappy shape, headed for disaster, how hard would it be to make it look like it was all one trader’s fault? I don’t honestly know. But the coincidental timing — this happens just as global banking faces its worst crisis in decades — does set off my first tier bullshit alarms.
Anothernut,
Today the people on CNBC discussed whether he was responsible for the panic early this week.
—does set off my first tier bullshit alarms.
Me too. It’s a tough one to believe.
As Jim Sinclair wrote:
“I smell a rat. Rogue trader sounds a lot better than SIVs. The rogue takes the hit, does one year at a country club lock-up and then gets retirement pay. To assume a trader had a position that could have made or lost 7,000 million and no one knew is raving BS.”
http://www.jsmineset.com
This was questioned on this mornings NPR Marketplace report. The reporter seemed very skeptical that such a thing could actually happen. So, if the media is acutally doubting this, I would suspect it is in fact, bullshit
You all probably know a hell of a lot more about this kind of stuff than I do.. But this smells fishy, even to me. After reading a few articles about it, the biggest point to ponder, for me, seems to be why a “rogue trader” who has the knowledge and technical ability to single-handedly “hack the system” and steal billions, would do so with absolutely no personal motivation or gain. A thief doesn’t break into your house to steal your stuff, then leave all the loot in your front yard.
(sorry, that’s the best analogy I can come up with — the whole thing makes no sense to me)
Anyone have more background info on the fall guy?