The Fraud Unseen
Lance on Jan 26 2008 at 10:47 am | Filed under: Risk
So, we now have a new record for trader fraudulently losing billions on bad trades. Nick Leeson will soon join the 1972 Dolphins as great, but behind by the numbers. Just like then I have a niggling thought in the back of my mind, and so does Adam at Adams Options:
So some trader at Societe General loses a cool $7 billion. The big question is why, I mean he was apparently in some salaried position.
Trying to impress his boss? Trying to impress our favorite French anchorwoman? Guess we’ll never know.
Sight unseen, these “rogue” losses are always the same. Trader makes bet, bet goes bad, trader fakes trades and doubles and doubles in order to make back the loss. Overseas blogger uses whole mess as excuse to post Melissa picture.
Make that two overseas bloggers.
What runs through my mind is this:
Finally it gets too big and the firm is forced to cover and come clean and produce some sort of bogus internal investigation to satisfy the authorities that it will never happen again.
It also makes you wonder how many times a trader goes through this cycle and is able to hold off long enough until the market moves in his direction and bails him out. Probably hundreds/thousands/millions of times for every one that comes to light.
With as much debt sloshing around as we have now, I suspect volatility will leave many of these guys in a position where it can’t be hid. Of course, most will be too small to actually hit the news. It is a risk however.
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