Oct. 5: French rouge bank trader Jerome Kerviel, who worked for French bank Societe Generale, on Tuesday was convicted of fraud and has been jailed for three years. The court has also ordered him to pay 4.9 billion euro (£4.25 billion) in damages to the bank.
The judge said there was no evidence that the bank’s managers had been aware of his activities and the bank is not responsible for anything. The loss caused by Kerviel to the French bank is the biggest caused by a single trader, dwarfing the $1.4 billion loss by trader Mr Nick Leeson that brought down the British bank Barings in the 1990s.
Kerviel was also found guilty of forgery, breach of trust and unauthorised computer use for covering up bets worth nearly 50 billion euro between late 2007 and early 2008 by the court on Tuesday. The fraud was uncovered by the bank in January 2008 and the bank said that Kerviel, who was responsible for plain vanilla futures hedging on European equity market indices, had taken “massive fraudulent directional positions in 2007 and 2008 beyond his limited authority.”
The bank said that Kerviel had managed to conceal fraudulent positions through a scheme of elaborate fictitious transactions.
The bank, which discovered the concealed trades on January 19 and 20, 2008, had decided to close the positions in the market as quickly as possible. However, this coincided with a sharp market sell-off, and the bank’s losses on the deals spiralled to 4.9 billion euros. Kerviel’s lawyer Mr Olivier Metzner told the media outside the Paris court on Tuesday that the former trader would appeal against the verdict. Kerviel had maintained throughout the trial that he had just “tried to do his job in the interests of the bank.”