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From Christopher J. Addy CA CFA, Entreprise Castle Hall Alternatives Inc. (www.castlehall.ca
...The trader, who according to Bloomberg made a salary and bonus combined of less than Euro100,000 a year, had apparently joined the trading floor from the firm's back office in 2006 and used that knowledge to manipulate Soc Gen's accounting systems to conceal his trades. Bloomberg reports that the trader apparently created a fictitious trade to offset every real transaction.
Rogue trading and misvaluation crop up with unnerving regularity in the institutional world. Only four months ago, Calyon, the investment banking arm of Soc Gen's competitor Credit Agricole, disclosed an "unauthorised proprietary trade" which generated a loss of $347 million. In April 2007, a two person trading team in New York used fake valuations to conceal a $400 million decline in value of their natural gas option book at the Bank of Montreal.
In 2006, the heads of a Citibank commodities trading desk pled guilty following a scheme designed to inflate the perceived profits generated by their desk. Back in 2002 and 2003, another Citi rogue trader ran up losses of $20 million trading gold and silver. In late 2005, a trader at Deutsche Bank London ran up a (British Pound) 30 million loss. In 2004, the National Australia Bank announced an (Australian dollar) 340 million loss due to rogue trading in currency options. Then, of course, there's J...................... To view our full article Click here
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