A brilliant young rogue trader, who spun an elaborate web of fake transactions from his desk, has cost France's second-biggest bank €4,9-billion in what appears to be the largest fraud by a single trader.
Jerome Kerviel (31) deemed "a genius of fraud" by France's top banker, caused five times the financial damage of the notorious rogue trader Nick Leeson, who sparked the collapse of Barings Bank in 1995 with losses of £800-million.
The discovery at the weekend of what SocGen deemed an isolated fraud of "unprecedented size" caused concern in a market already reeling from the sub-prime crisis. There was astonishment at how a junior trader on the bank's award-winning derivatives desk, described as both "brilliantly intelligent" and a troubled Walter Mitty character, could create fictitious accounts and wreak havoc. The young trader appeared to have acted alone and reaped no personal financial benefit. "[It's] everyone's worst nightmare," said Richard Fuld, chairperson of the rival bank Lehman Brothers at the World Economic Forum in Davos.
London was on Thursday awash with rumours that SocGen's desperate race to clear up the damage and unravel Kerviel's trading positions were at the heart of the stockmarket turmoil on Monday when share prices across Europe crumbled by 7%.
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