A junior dealer detained over the biggest fraud in banking history is helping investigators, police said today, as his employer revealed that he had bet €50 billion ($73.3 billion) of its money on illicit trades.
A man, whom French media are identifying as Societe Generale employee Jerome Kerviel who is alleged to be at the heart of an alleged €4.9 billion trading fraud.
French bank Societe Generale said today it discovered the full extent of the fraud last weekend and unwound the mass of positions in slumping markets between January 21st to 23rd, leaving it nursing a €4.9 billion loss.
Police have named the trader as Jerome Kerviel, a previously anonymous derivatives dealer who was not considered a star by his superiors, but who had gained extensive knowledge of SocGen's risk control systems during his 7-year career there.
Kerviel (31) handed himself into police yesterday.
He can be detained for questioning until tomorrow afternoon at which point the police will have to decide whether to refer him to an investigating magistrate ahead of possible charges, or release him for lack of evidence.
"The detention is going very well. He is talking about the things he has been accused of," Jean Michel Aldebert, the head of the financial section of the Paris prosecutors office, told reporters on this afternoon.
Many market experts have cast doubt on SocGen's affirmation that a lone trader was able to conceal positions that were higher than the gross domestic product of Morocco.
In a 7-page statement today, the bank said their staffer created fictitious accounts to make it look as though his positions had been covered, when in fact they remained open.
It said he also falsified documents to justify his actions. The anomalous trades only came to light on January 18th and SocGen said the trader had acknowledged "committing unauthorised acts and, particular, creating fictitious operations."
The bank said the deals conducted as it unwound the trader's positions accounted for between 5.9-8.1 per cent of trade in the broad Eurostoxx stock index futures, 5.7 to 7.8 per cent of the futures trade on the German benchmark DAX index and up to 3.1 per cent of futures on the British FTSE.
Some market analysts have questioned whether the heavy sales orders from SocGen played a crucial part in the sharp falls seen in world markets at the start of last week - a drop that helped convince the US Federal Reserve to slash its rates on Tuesday.