Soc Gen in world's biggest fraud case

24 January 2008

Societe Generale has released a shocking statement announcing that it has uncovered an "exceptional" fraud committed by a rogue trader, who has made off with $7.14 billion of the French bank's money.

France's second largest bank said the fraud had been committed by a single futures trader in 2007 and 2008 through a "scheme of elaborate fictitious transactions".

Soc Gen was alerted to the fraud at its French markets division at the weekend and it became apparent that it was "exceptional in size and nature" and much bigger than the Nick Leeson trading scandal in 1995 that made British bank Barings bankrupt.

The unnamed trader hid fraudulent positions through knowledge of the bank's control systems, Soc Gen said in a statement.

According to the bank, the individual concerned confessed to the fraud and he and his supervisors have been dismissed. Trading in Soc Gen's shares have been suspended.

Although Soc Gen chief executive Daniel Bouton offered to resign, the board rejected this.

The bank is now seeking $8.02 billion in new capital via a rights issue of preferred shares to investors.

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