$7.7b super-rogue loses appeal bid

By John Lichfield

It would take Jerome Kerviel thousands of years to repay all the money he lost ... once he gets out of jail

Jerome Kerviel, the most spectacular rogue trader in financial history, yesterday lost his appeal and was sentenced to three years in jail and ordered to repay €4.9 billion ($7.7 billion).

Kerviel, 35, claimed during appeal hearings in June that the French bank Societe Generale tacitly approved his risky trades and exploited the collapse of his position in 2008 to "bury" its own losses in the US sub-prime debacle.

But the Paris appeal court yesterday ruled that Kerviel was solely responsible for the €4.9 billion loss - the biggest in trading history - because he had evaded internal controls to make bets of up to €50 billion on stock-market futures. He is expected to seek leave to appeal to France's highest court, the Cour de Cassation.

Kerviel used to take home a salary and bonus of about €100,000. But he is now making €30,000 a year in a computer company. In theory, even if he handed over all his earnings, it would take him somewhere between about 49,000 and 300,000 years to repay his losses to SocGen.

The bank says it will not try to recover the whole sum, but it will claim any money Kerviel received from book or film contracts.

The "affaire Kerviel" exploded in early 2008, at the beginning of the global financial crisis. Kerviel, a junior trader, was found to have made huge one-way trades on the direction of European stock markets.

He was supposed to make simultaneous "bets" on stock exchange futures going up and down to make modest amounts of money on tiny margins between the two.

Instead, he "faked" covering trades and hacked into computers to defuse the bank's internal safeguards.

At his trial in 2010, and at the appeal hearings, Kerviel and his lawyers admitted he had "lost all sense of reality". But they called a string of witnesses who said he was also a victim of a greedy financial system which had itself lost touch with reality. While Kerviel was winning, they said, the bank tacitly approved his dealings.

When he got into trouble, he was made a scapegoat for the bank's wider losses in the financial crisis.

Kerviel's lawyer, David Koubbi, described the verdict as "an absolutely lamentable miscarriage of justice". He said his client would consider a further appeal. Kerviel remains free until that decision is made.

Counting the losses
Ongoing: The trial of Kweku Adoboli has reached its sixth week. The 32-year-old former trader at Swiss bank UBS is accused of causing losses of US$2.3 billion and faces four criminal charges.
February 2009: Alexis Stenfors, former senior trader at Merrill Lynch, was banned from working in the City after admitting he deliberately overvalued his trading positions to hide losses of US$100 million.
February 1995: Barings, one of Britain's oldest investment banks, collapsed after Nick Leeson, a futures trader in Singapore, lost £860 million in derivatives trading. He was jailed in Singapore.

- Independent

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