Rogue trader goes on trial for his multi-billion gambles
Rogue trader Jerome Kerviel went on trial in Paris yesterday accused of one of history's biggest bank frauds.
Mr Kerviel is charged with gambling tens of billions of euros in secret trades that humiliated French banking powerhouse Societe Generale. The scandal led to €5bn (£4.2bn) in losses once the bank unwound Kerviel’s positions in January 2008.
The case broke ahead of what would become a series of crises in the finance world, from the fall of Lehman Brothers, to Wall Street financier Bernard Madoff’s multi-billion-dollar Ponzi scheme.
Kerviel, 33, now working at a computer technology company, plans to argue that he was a scapegoat for the bank, that risky betting practices were commonplace among traders, and that superiors knew what he was doing and said nothing as long as he was making money for the bank.
The trader, with dark circles under his eyes, stood before the court and answered questions about his identity and current status, wiping sweat from his brow at one point. A judge read out the charges against him: forgery, breach of trust, and unauthorised computer use.
His former bosses were questioned in the probe, but none of them face charges. A few bank executives resigned in the scandal’s aftermath, including chairman Daniel Bouton.
Mr Kerviel has told investigators that the weight of money lost meaning for him, that he was living in a virtual world, and had disconnected from reality. Prosecutors and the bank have said he did not appear to profit from his unauthorised trades.
The former futures trader risks five years in prison if convicted.
He has argued that Societe Generale was trying to deflect attention from subprime-related losses by making him a scapegoat.
The bank says Mr Kerviel made bets of €50bn on futures contracts on three European equity indices. Societe Generale secretly began unwinding his positions on January 21, 2008, when US markets were closed, putting massive pressure on futures markets and exacerbating its losses.
Since the scandal, Societe Generale has tightened computer security, reinforced controls, and taken more account of the possibility of fraud.