Billions gambled in bank fraud

The world’s largest ever bank fraud was today uncovered – after a junior trader gambled away £3.7 billion.

French bank Societe Generale said the trader fooled investors and had overstepped his authority.

The bank’s losses dwarf the £800 million that Brit Nick Leeson lost Barings bank back in 1995.

The rogue trader, who is being sacked and faces a criminal investigation, was today described as “young and inexperienced”.

The bank, France’s second largest, was today desperately trying to find out how he managed to gain the authority to gamble away such huge sums of money.

It said the trader had confessed to the “exceptional fraud” which had involved unusually high trading positions, with him taking advantage of his knowledge of the group’s security systems, gained while working in a previous position.

Societe Generale said he had been working “beyond his limited authority” and had managed to hide his trades “through a scheme of elaborate fictitious transactions”.

It is believed the young trader behind the sensational losses had been dealing in what are known as “plain vanilla” futures linked to European indices – effectively betting on share movements.

Managers of the culprit have been sacked, but Societe Generale said it had rejected chairman and chief executive Daniel Bouton’s offer of resignation.

The loss is twice the amount written off by the bank following the global credit crunch. The loss will force Societe Generale to try and raise more than £4 billion in a bid to boost its balance sheet.

But the bank said it would still make between £448 million and £597 million in 2007. Shares in Societe Generale have been suspended.