Jerome Kerviel believes the judge who convicted him of fraud, sentenced him to five years in prison, and demanded the rogue trader pay back the $7 billion he lost handed him an unjust punishment.
Kerviel’s point of view is that he didn’t make a dime, the bank was complicit in his trades, and dozens of other traders did exactly the same thing.
His defence lawyer summed it up in one sentence:
“Kerviel was formed, formatted and deformed by Societe Generale. He is their creature.”
Kerviel has explained that same very defence many times. But today he’s explaining everything to Der Spiegel, including the greatest trades he’s ever made. According to Kerviel, SocGen not only made €500,000 from Kerviel’s Allianz short, and €20 million from his DAX short, but Kerviel only lost the bank $7 billion because he called the subprime crash.
He told the newspaper:
“In March, I saw that the risks associated with American subprime loans had gotten out of control, and I made a bet that there would be a crash. I was so enthralled with my idea that, little by little, I took out positions worth €30 billion… From dawn till dusk, I would stare at the screen, trading enormous amounts, hardly getting any sleep and making €1.5 billion in profits for the bank before the year was up.”
Unfortunately, the interviewer doesn’t waste time indulging his fantasies, because if they did, they would have asked Kerviel, “So if Soc Gen had only kept your trades on the books – and not unwound them at a $7 billion loss – they’d be rolling in it right now?”
Instead, the two move on to discussing how Kerviel was able to take $7 billion of risk in the first place. Kerviel explains a few ways this may have happened:
“My supervisors had deactivated the system of alerts.”
“My bosses removed all the safeguards off my computer.”
“I would get to the bank before 7 a.m. and oftentimes only leave it around 10 p.m. It was stress and adrenaline and a passion for the job that allowed me to make it though it all. Oftentimes, I wouldn’t even go outside to get something to eat.”
And then the major reason it happened:
I only had to make sure that, when evening came, it looked like the trading limits had been observed. In order to conceal my trading positions, I would conclude offsetting transactions that would make it appear in the trading system as if the exposure had been neutralized.
But, Kerviel insists, the judge treated him unfairly.
“People obviously were trying to protect the bank and the financial community in Paris. And, to do so, Jerome Kerviel had to be ‘shot down.'”
In fact, says Kerviel, many people have been treating him unfairly.
“People have been digging around in my life. It was announced that police had found a Koran while searching through my apartment. So, then, people thought I was working for al-Qaida. Ridiculous.”
Of course Kerviel’s perspective on things like this should be taken into consideration (although he tells Der Spiegel he doesn’t do drugs). One because he speaks in third person. But also because according to him, he practically fell out of his chair because he was so shocked that the court actually found him guilty.
It pulled my legs right out from under me, it was so unexpected. At first, I was paralysed. More than anything, I was anxious on my mother’s behalf that I would have to go straight to prison.
The courtroom, on the other hand, saw his reaction another way.
The Paris daily Le Figaro described [Kerviel] in the courtroom as follows: “A lonely man takes deep breaths, sitting groggily with hanging head.”
However, in Kerviel’s defence, SocGen should have known Kerviel was trouble when he meddled in the German stock index and caused the government to launch an investigation.
“I had made a €30 billion bet that the DAX would go down. I profited from the fact that the markets actually did tank in the fall of 2007. I liquidated my position, thereby helping to stabilise the market. Market participants sensed that the market was being manipulated and complained about it to the German exchange. It launched an investigation and saw that I was helping to stabilise the DAX.”
Instead of a red flag, this instance seems to have convinced Kerviel’s superiors that he deserved access to more credit. The reason for which is obvious – it earned them €20 million.
The rest of the (amazing) interview is in Der Spiegel.