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Jérôme Kerviel (; born 1977) is a French
rogue trader A rogue trader is person who makes financial trades in an unauthorised manner. Rogue trader may also refer to: * ''Rogue Trader'' (book), the autobiography of (and later a movie about) Nick Leeson, the man who caused the collapse of Barings Bank * ...
who was convicted and imprisoned in the 2008 Société Générale trading loss for breach of trust,
forgery Forgery is a white-collar crime that generally refers to the false making or material alteration of a legal instrument with the specific intent to defraud anyone (other than themself). Tampering with a certain legal instrument may be forbidd ...
and unauthorized use of the bank's computers, resulting in losses valued at
€ The euro sign () is the currency sign used for the euro, the official currency of the eurozone and unilaterally adopted by Kosovo and Montenegro. The design was presented to the public by the European Commission on 12 December 1996. It consists ...
4.9 billion.


Early life

Kerviel grew up
Pont-l'Abbé Pont-l'Abbé (; , "Abbot's bridge") is a commune in the Finistère department of Brittany in north-western France. The self-styled capital of Pays Bigouden (roughly the region between the river Odet and the Bay of Audierne), Pont-l'Abbé was fo ...
,
Brittany Brittany (; french: link=no, Bretagne ; br, Breizh, or ; Gallo language, Gallo: ''Bertaèyn'' ) is a peninsula, Historical region, historical country and cultural area in the west of modern France, covering the western part of what was known ...
. His mother, Marie-Josée, is a retired hairdresser, and his father, Charles, was a blacksmith. He has an older brother, Olivier. Kerviel was married, but he and his wife separated in 2008. Kerviel graduated in 2000 from
Lumière University Lyon 2 Lumière University Lyon 2 (french: Université Lumière Lyon 2) is one of the three universities that comprise the current University of Lyon, having splintered from an older university of the same name, and is primarily based on two campuses in ...
with a
Master of Finance The Master of Finance is a master's degree awarded by universities or graduate schools preparing students for careers in finance. The degree is often titled Master in Finance (M.Fin., MiF, MFin), or Master of Science in Finance (MSF in North Am ...
specializing in organization and control of financial markets. The university's financial program, which was initiated in the 1990s with the support of France's larger banks, was intended to prepare students for middle and
back office A back office in most corporations is where work that supports ''front office'' work is done. The front office is the "face" of the company and is all the resources of the company that are used to make sales and interact with customers and client ...
positions in the trading departments of financial institutions. Prior to that he received a
bachelor's degree A bachelor's degree (from Middle Latin ''baccalaureus'') or baccalaureate (from Modern Latin ''baccalaureatus'') is an undergraduate academic degree awarded by colleges and universities upon completion of a course of study lasting three to six ...
in finance from the
University of Nantes The University of Nantes (french: Université de Nantes) is a public university located in the city of Nantes, France. In addition to the several campuses scattered in the city of Nantes, there are two satellite campuses located in Saint-Nazaire a ...
. During an interview, one of Kerviel's former lecturers at Lyon, Gisèle Reynaud, stated that Kerviel "was a student just like the others, a young man, and he didn't distinguish himself from the others." In 2001, at the suggestion of Thierry Mavic, the mayor of Pont l'Abbé, Kerviel stood for a seat on the local council with the
Union for a Popular Movement The Union for a Popular Movement (french: link=no, Union pour un mouvement populaire, ; UMP, ) was a centre-right political party in France that was one of the two major contemporary political parties in France along with the centre-left Social ...
but was not elected.


Société Générale

Kerviel joined the middle office of the bank
Société Générale Société Générale S.A. (), colloquially known in English as SocGen (), is a French-based multinational financial services company founded in 1864, registered in downtown Paris and headquartered nearby in La Défense. Société Générale ...
(SocGen) in the summer of 2000, working in its compliance department. In 2005 he was promoted to the bank's Delta One products team in
Paris Paris () is the capital and most populous city of France, with an estimated population of 2,165,423 residents in 2019 in an area of more than 105 km² (41 sq mi), making it the 30th most densely populated city in the world in 2020. S ...
, where he was a junior trader. SocGen's Delta One business includes
program trading Program trading is a type of trading in securities, usually consisting of baskets of fifteen stocks or more that are executed by a computer program simultaneously based on predetermined conditions. Program trading is often used by hedge funds an ...
,
exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the ...
s, swaps, index futures and
quantitative trading Mathematical finance, also known as quantitative finance and financial mathematics, is a field of applied mathematics, concerned with mathematical modeling of financial markets. In general, there exist two separate branches of finance that require ...
.
Christian Noyer Christian Noyer (born 6 October 1950) is a French economist who served as Governor of the Bank of France from 2003 to 2015. In this capacity, he chaired the Bank for International Settlements from 2010 until 2015. He had previously served as Vice ...
, governor of the
Bank of France The Bank of France ( French: ''Banque de France''), headquartered in Paris, is the central bank of France. Founded in 1800, it began as a private institution for managing state debts and issuing notes. It is responsible for the accounts of the F ...
, has described Kerviel as a "computer genius"; however, sources within Société Générale described Kerviel as "not a star". Kerviel earned a bonus of
€ The euro sign () is the currency sign used for the euro, the official currency of the eurozone and unilaterally adopted by Kosovo and Montenegro. The design was presented to the public by the European Commission on 12 December 1996. It consists ...
60,000 on top of a €74,000 salary in 2006, considered modest compared to the salaries paid to traders in the financial markets. He had hoped for a €600,000 bonus for 2007 and would have received at least half that amount.


Unauthorized trading

SocGen states that Kerviel was assigned to
arbitrage In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between the ...
discrepancies between
equity derivative In finance, an equity derivative is a class of derivatives whose value is at least partly ''derived'' from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other ty ...
s and cash equity prices, and "began creating the fictitious trades in late 2006 and early 2007, but that these transactions were relatively small. The fake trading increased in frequency, and in size". Bank officials claim that throughout 2007, he had been trading profitably in anticipation of falling market prices; however, they have accused him of exceeding his authority to engage in unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. Kerviel tried to conceal the activity by creating losing trades intentionally so as to offset his early gains. According to the
BBC #REDIRECT BBC #REDIRECT BBC Here i going to introduce about the best teacher of my life b BALAJI sir. He is the precious gift that I got befor 2yrs . How has helped and thought all the concept and made my success in the 10th board exam. ...
...
, Kerviel generated in hidden profits at the beginning of 2008. His employers say they uncovered unauthorized trading traced to Kerviel on 2008. SocGen then closed out these positions over three days of trading beginning 2008, a period after which the market experienced a large drop in equity indices, and losses attributed are estimated at (). SocGen claimed Kerviel "had taken massive fraudulent directional positions in 2007 and 2008 far beyond his limited authority" and that the trades involved European stock index futures. Though SocGen officials say Kerviel apparently worked alone, skeptics question how unauthorized trading of this magnitude could go unnoticed. Kerviel's unassuming background and position have heightened the skepticism that he worked alone. Some analysts suggest that unauthorised trading of this scale may have gone unnoticed initially due to the high volume in low-risk trades normally conducted by his department. SocGen said that whenever the fake trades were questioned, Kerviel would describe it as a mistake then cancel the trade, after which he would replace that trade with another transaction using a different instrument to avoid detection. Kerviel's lawyers, Elisabeth Meyer and Christian Charrière-Bournazel, said that SocGen's managers "brought the loss on themselves"; accused them of wanting to "raise a smokescreen to divert public attention from far more substantial losses in the last few months"; and said that Kerviel had made the bank a profit of US$2 billion as of 2007. SocGen managers have described some of the means Kerviel employed to avoid the bank's internal controls and escape detection. Executive Chairman Daniel Bouton describes the pattern as like "a mutating virus", in which hundreds of thousands of trades were hidden behind offsetting faked
hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoini ...
trades. Officials say Kerviel was careful to close the trades in just two or three days, just before the trades' timed controls would trigger notice from the bank's internal control system, and Kerviel would then shift those older positions to newly initiated trades. Experts have expressed skepticism of SocGen's account, saying that a pattern of closing out trades within the three-day cycle alleged could not be accomplished given the immense sums involved. Kerviel is not thought to have profited personally from the suspicious trades.
Prosecutor A prosecutor is a legal representative of the prosecution in states with either the common law adversarial system or the Civil law (legal system), civil law inquisitorial system. The prosecution is the legal party responsible for presenting the ...
s say Kerviel has been cooperative with the investigation, and has told them his actions were also practiced by other traders in SocGen. Kerviel admits to exceeding his credit limits, but claims he was working to increase bank profits. He told authorities that the bank was happy with his previous year's performance, and was expecting to be paid a €300,000 bonus on a declared profit (approximately 0.5%). Family members speaking out say SocGen was using Kerviel as a
scapegoat In the Bible, a scapegoat is one of a pair of kid goats that is released into the wilderness, taking with it all sins and impurities, while the other is sacrificed. The concept first appears in the Book of Leviticus, in which a goat is designate ...
to excuse its recent heavy losses.


Legal repercussions

In answer to the rumors that Kerviel had fled Paris following the discovery of the unauthorised trading, on 2008 Kerviel's lawyer denied that he attempted to disappear and said he remained in Paris to face the accusations. That same day, SocGen filed a lawsuit against "a 31-year-old person" for creating fraudulent documents, using
forged Forging is a manufacturing process involving the shaping of metal using localized compressive forces. The blows are delivered with a hammer (often a power hammer) or a die. Forging is often classified according to the temperature at which it ...
documents and making attacks on an automated system, according to Clarisse Grillon, a spokeswoman for the
Nanterre Nanterre (, ) is the prefecture of the Hauts-de-Seine department in the western suburbs of Paris. It is located some northwest of the centre of Paris. In 2018, the commune had a population of 96,807. The eastern part of Nanterre, bordering t ...
prosecutor. ''
Le Figaro ''Le Figaro'' () is a French daily morning newspaper founded in 1826. It is headquartered on Boulevard Haussmann in the 9th arrondissement of Paris. The oldest national newspaper in France, ''Le Figaro'' is one of three French newspapers of reco ...
'' reported that in addition to the SocGen lawsuit, a group of
shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...
s filed a lawsuit for fraud, breach of trust and forgery. Around 25 January 2008, police raided the Paris headquarters of SocGen and Kerviel's apartment in the western suburb of
Neuilly-sur-Seine Neuilly-sur-Seine (; literally 'Neuilly on Seine'), also known simply as Neuilly, is a commune in the department of Hauts-de-Seine in France, just west of Paris. Immediately adjacent to the city, the area is composed of mostly select residentia ...
to seize his computer files. On 26 January 2008, the Paris prosecutors' office stated that Kerviel "is not on the run. He will be questioned at the appropriate time, as soon as the police have analysed documents provided by Société Générale." He was taken into police custody later that day. Kerviel's initial 24-hour detention was extended to 48 hours while French law enforcement questioned him about possible accomplices. The investigation later widened to encompass his personal cell phone records, and to explore possible links to other individuals working at rival banks and private
investment firm An investment company is a financial institution principally engaged in holding, managing and investing securities. These companies in the United States are regulated by the U.S. Securities and Exchange Commission and must be registered under t ...
s who may have been involved. The police were investigating whether Kerviel worked alone, and whether any investors outside of SocGen may have been tipped off in advance. Police were interested whether others were involved, either in the trades themselves, or whether they received notice of the bank's impending sell-off before the details of the scandal were publicly disclosed. Kerviel was formally charged on 2008 with abuse of confidence and illegal access to computers. He was released from custody a short time after. The charges filed carry a maximum three-year prison term. On 2008 investigating judges Renaud van Ruymbeke and Françoise Desset had rejected prosecutor Jean-Claude Marin's bid to charge Kerviel with the more serious crime of "attempted fraud" and refuse
bail Bail is a set of pre-trial restrictions that are imposed on a suspect to ensure that they will not hamper the judicial process. Bail is the conditional release of a defendant with the promise to appear in court when required. In some countries ...
. Kerviel's trial began on 8 June 2010. On , he was found guilty and sentenced to five years of prison, with two years suspended, full
restitution The law of restitution is the law of gains-based recovery, in which a court orders the defendant to ''give up'' their gains to the claimant. It should be contrasted with the law of compensation, the law of loss-based recovery, in which a court o ...
of the $6.7 billion which was lost, and a permanent ban from working in financial services. Caroline Guillaumin, a spokeswoman for SocGen, stated that the restitution was "symbolic", and that the bank had no expectation that the sum would be paid. Olivier Metzner, Kerviel's lawyer, described the sentence as "extraordinary" and said that Kerviel would
appeal In law, an appeal is the process in which cases are reviewed by a higher authority, where parties request a formal change to an official decision. Appeals function both as a process for error correction as well as a process of clarifying and ...
. Kerviel's sentence was suspended until his appeal was completed. On 24 October 2012, a Paris appeals court upheld the October 2010 sentence to three years in prison with another two suspended, and ordered Kerviel to reimburse 4.9 billion euros to SocGen for its loss. In March 2014, a French high court upheld Kerviel's prison sentence but ruled he would not have to repay €4.9bn. On 7 June 2016, the Court of Appeal of Versailles condemned SocGen for their unlawful firing of Kerviel. Société Générale said it would appeal.


Lemaire Consultants

In April 2008, following Kerviel's provisional release, he was hired by Lemaire Consultants & Associates, an information systems and computer security consulting firm.


Pilgrimage

While awaiting a ruling on his legal appeal and still protesting SocGen's stance in his case, Kerviel met with
Pope Francis Pope Francis ( la, Franciscus; it, Francesco; es, link=, Francisco; born Jorge Mario Bergoglio, 17 December 1936) is the head of the Catholic Church. He has been the bishop of Rome and sovereign of the Vatican City State since 13 March 2013. ...
outside the Vatican on 19 February 2014, and undertook a pilgrimage from Rome to Paris against the "tyranny of the markets".


Release from prison

On 8 September 2014, Kerviel was released from Fleury Merogis prison having served less than five months of detention. He was to begin a job with an IT consultancy firm.


See also

*
Nick Leeson Nicholas William Leeson (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorized and speculative trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest merchant bank. Leeson w ...
*
Toshihide Iguchi (1951–2019) was an Executive VP and U.S. Government Bond trader at Daiwa Bank's New York Branch, who was responsible for $1.1 billion in unauthorized trading losses accumulated over a period of 12 years beginning in 1983. Early life Toshihide ...
*
Kweku Adoboli Kweku Adoboli (born 21 May 1980) is a Ghanaian investment manager and former stock trader. He was convicted of illegally trading away US$2 billion (£1.3 billion STG) as a trader for Swiss investment bank UBS. While at the bank he pr ...
*
Bruno Iksil In April and May 2012, large trading losses occurred at JPMorgan's Chief Investment Office, based on transactions booked through its London branch. The unit was run by Chief Investment Officer Ina Drew, who later stepped down. A series of deriv ...
* Howie Hubler *
List of trading losses The following contains a list of trading losses of the equivalent of USD100 million or higher. Trading losses are the amount of principal losses in an account. Because of the secretive nature of many hedge funds and fund managers, some notable los ...


References


External links


Excerpts of police questioning
* * * Fritz-Morgenthal, Sebastian/ Rafeld, Hagen
Breaking Down the Biggest Trading Fraud in the History of Banking
in: Risk Professional, , pp. 47–51. {{DEFAULTSORT:Kerviel, Jerome 1977 births Living people 21st-century French criminals French fraudsters French male criminals French prisoners and detainees French stock traders People convicted of fraud People from Pont-l'Abbé Prisoners and detainees of France Rogue traders University of Lyon alumni University of Nantes alumni