Massive Fraud in France Societe Generale Hit By 4.9 Billion Crime
French bank Societe Generale has revealed that it has been hit by one of the biggest alleged cases of fraud in banking history. The bank discovered that fraud by one of its traders had led to losses of 4.9 billion.
French bank Societe Generale has announced a massive fraud.
On Saturday the bank discovered that one of its employees had taken "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority." The unnamed trader, who has since been given his marching orders, used his knowledge of the bank's security systems to cover his tracks through a series of fictituous transactions, the bank announced. Shares of the bank were suspended on Thursday.
The trader, who a source at Societe Generale told Reuters was "not one of its stars" and was relatively young, had been handling futures contracts and betting on broad share market movements. His managers are also to lose their jobs. Chairman and CEO Daniel Bouton offered to resign but the board rejected the offer.
The fraud has echoes of the Nick Lesson trading scandal in 1995 that brought down Barings Bank, a company that had been in business for 230 years, after the Singapore-based dealer lost 860 million pounds (then worth $1.38 billion) on Asian futures markets.
The Bank of France announced Thursday that the Banking Commission would be holding an inquiry into the Societe Generale case and French Economy Minister Christine Lagarde is expected to make a statement later in the day.
On Thursday the bank also announced writedowns of 2.05 billion related to effects from the US subprime mortgage crisis. It said on it was still expecting to see a profit for 2007, but probably only between 600 million and 800 million -- in stark contrast to the 5.221 billion profits it posted in 2006.