France's $7 Billion Bank Bust
As the year began, the venerable Societe Generale — France's second largest bank — found itself trying to explain just how a mid-level futures trader had managed to lose $7 billion in a rogue operation without anyone noticing. On Jan. 24, bank officials acknowledged that Jerome Kerviel, 31, had committed what could amount to one of the biggest insider frauds in banking history. Using his knowledge of internal security controls, Kerviel allegedly hid dozens of improper trading positions with faked hedging transactions and client authorizations — risking up to $63 billion of Societe General's money. As world markets tumbled in early 2008, those positions amounted to billions of dollars in losses for the bank. Kerviel's motives remain unclear: the young trader personally saw no profit from the scheme. In fact, he continues to claim he never hid what he was doing from bank officials.