French trader's $7 billion swindle slams Societe Generale

The Associated Press reports that France's second-largest bank by market capitalization, Societe Generale, has uncovered a rogue trader who reportedly stole $7.14 billion -- forcing the bank to raise $8.02 billion and suspending trading in its stock on the Paris stock exchange.

Details are sketchy. The bank discovered the fraud on January 19 and 20th. It said a trader at the futures desk had misled investors in 2007 and 2008 through a "scheme of elaborate fictitious transactions." The trader used his knowledge of the group's security systems to conceal his fraudulent positions. The unnamed trader beats Nicholas Leeson, whose 1995 $1.38 billion trading fraud in Singapore brought down Barings Bank and was made into a movie.

Societe General, whose stock has lost about half its value over the last six months, has already taken a $3 billion charge for bad subprime mortgages. No word on what happened to the trader's $7 billion -- or whether this discovery will have repercussions throughout the global financial markets.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.