Chapter Six

Jérôme Kerviel and Société Générale, 2008

The life of a monk is supposed to be one of religious devotion, marked by vows of poverty, celibacy, and silence; of devotion to the study of religion and a peaceful way of life. While that image is mostly true today, such was not the case throughout history. Back in the eleventh century, the Catholic Church was literally fighting to spread its faith throughout the world, battling for control of the holy lands in the Middle East. Under the authority of the Pope himself, Christian soldiers were sent on a series of religious crusades to take back the holy lands, spreading their message along the way.

During the First Crusade, Jerusalem was captured by the Christians, who secured the town that would become a popular religious pilgrimage throughout the next century. Opening up this route meant a steady parade of devotees making their way along rugged terrain. It was a hard and long trek, especially in those days. It also meant an abundance of thieves along the way who were eager to rob the unarmed and unassuming pilgrims.

After a scandalous number of robberies were reported, a French knight named Hugues de Payens proposed the formation of a monastic order dedicated to the protection of the pilgrims headed to Jerusalem. And thus was born the Knights Templar.

Members of the Knights Templar lived under a very strict code of conduct, which included eating in silence, avoiding women, and adhering to a specific dress code. The dress code included the well-known white mantle that featured a large red cross emblazoned across it. Collectively, members became known as “ Les Moines-Soldats ,” or “the soldier monks.”

The Knights were fanatically devoted to both spreading the word of God and destroying all those who opposed his word. Their dedication was both admirable and contemptible. As the Knights’ ranks and reputation swelled, so too did their reach. They entered into financial arrangements with the pilgrims, providing letters of credit and overseeing the business affairs for those off fighting in the Crusades. Money began pouring in at the various headquarters of the Knights Templar, which led to various European monarchs worrying about the group’s power and influence. Accusations of financial impropriety—as well as various crimes against the church—began to surface, and the Knights Templar were outlawed. Many historians have argued that the Knights were merely scapegoats, and their dissolution was arranged by the king of France—a move he made to avoid repaying his debts. The Order of the Knights of Templar was disbanded, semiofficially, in 1312, and les moines-soldats  were relegated to the history books; at least for the time being.

The soldier monks ceased to exist for many centuries, until the idea was resurrected by a new group of French devotees in the late twentieth century. In its new manifestation, les moines-soldats  weren’t interested in spreading religious beliefs, nor did they take up arms for their cause. They did, however, immerse themselves in the financial world, and they carried with them the same level of dedication as their predecessors, though in a slightly different way. The new soldier monks were blindly dedicated to their cause and were followers of a Frenchman named Antoine Paille.

He was born in the ancient French town of Le Mans, a place best known for its twenty-four-hour endurance car races; his parents owned an apple orchard, scratching out a living as best they could picking and selling fruit. He was ambitious from birth and gifted with an innate ability in mathematics. He attended college at the elite École Nationale de la Statistique et de l’Administration Economique, France’s top statistical school. During his time at ENSAE, as the university is colloquially known, he was initially drawn, ironically enough, to the teachings of Karl Marx.

Paille was so drawn to socialist thinking that he came close to joining the Communist Union while still a student. He had begun attending regular meetings of the group and asking many questions. When a group leader responded to one of his questions by merely quoting a passage in Marx’s Das Kapital, Paille changed his mind about joining. To him, in their minds there was no possible answer except that which was prescribed by the book. Paille realized he was too much of a freethinker to subscribe to their way of life—a way that was dictated by another’s words. That personal stance would become the lifelong pursuit of the brilliant mathematician.

Paille graduated from ENSAE in 1977 and applied for admission to the École Nationale d’Administration (ENA), the graduate school that trains students for senior positions within the French government. He was denied admission, however, and opted instead for a position with a computer software company, where he spent his days developing computer programs for the French banking industry.

As the age of the personal computer dawned, Paille began to imagine the potential for these new, widely accessible machines. With his professional background in banking and finance and expertise in math, he saw a future where computers played a greater role in the world of finance. It was what he called the “triptych detonation,” a reference to the three-panel art displays favored by many painters and photographers. The three components—computers, math, and finance—were going to combine to revolutionize the investment world. And Paille was about to find out how correct he would be. In 1984, at the age of twenty-nine, he left his computer programming job, intent on realizing this dream of a triptych detonation in finance, and joined Société Générale.

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Société Générale was the creation of Emperor Napoleon III, the nephew of the more famous French emperor, and formed by imperial decree on May 4, 1864. The newly formed bank—whose name literally translates into “general company”—was charged with the task of developing both the industrial and commercial sectors for the nation. It was founded by a group of industrialists and financiers led by Eugène Schneider. Société Générale—or SocGen, as it’s commonly known in the banking world—grew rapidly and soon afterwards was able to boast a network of fifteen branches in Paris and thirty-two branches across the country.

From its inception, the bank was dedicated to financing the major domestic industrial manufacturers, but in 1901, executives began to look abroad and opened a subsidiary in Saint Petersburg, Russia. That experience gave SocGen the ability to open other new branches in both India and China, which in turn, allowed the bank to enter the lucrative business of currency exchange.

SocGen was nationalized following World War II, which meant that the government of France became its sole shareholder. The years following the end of the war were marked by severe inflation throughout France, a condition that remained constant through 1958. Then, in 1963, a new piece of legislation passed that opened the door for a new type of open-ended investment product, the Société d’Investissement à Capital Variable, or SICAV. It is essentially the French form of a money market fund, wherein the risks and returns of investing in stocks and bonds are shared by the shareholders. Société Générale was one of the first banks to offer this new product to clients.

Beginning in 1986 with a new government in France, a wave of privatizations swept the country, and Société Générale’s chance came one year later. The bank was held up as an example to its competitors, with enviable risk ratios, equity capital, and overall productivity. On June 27, 1987, the entire company’s equity—17.2 billion francs worth—was floated on the Paris stock exchange, and the bank’s privatization was complete. SocGen was no longer government-owned; however, years of being state-run had left its mark, and the bank continued to reflect the culture of the French government. Most noticeably, bank executives were exclusively graduates of the “ grandes écoles .” Anyone with any chance of succeeding at SocGen clearly had to be a member of this prestigious club.

By 2008, the bank was one of the three largest in France and had grown to over 162,000 employees, with its headquarters in La Défense, the epicenter of the French financial world situated on the outskirts of Paris. In its investment banking group, SocGen had developed a large proprietary trading operation, which mainly focused on European equities. In fact, most of the bank’s capital and risk on the trading floor were dedicated to equity derivatives, whether trading for its own account or making markets for clients. By 2008, SocGen was the European leader in this business.

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Equity derivatives are mostly based on the pricing of options, which goes back to the original brainchild of Antoine Paille in 1985. Société Générale’s options traders were known throughout the industry as “the soldier monks.” Recruits were among the best and the brightest the country had to offer, especially in the field of mathematics. Selecting those with only the best academic skills was characteristically French. According to Alexandre Fleury, the former deputy head of global exotic trading at Société Générale, “The French have distinguished themselves in equity derivatives because of their love of complicated math.”

Paille put it much more bluntly: “Our strategy was to be a world leader.”

As a Frenchman, Paille saw it as a moral obligation to hire only those from the top schools in the country—France’s grandes écoles . In addition to being French, they also needed to be brilliant. This elite club had advanced degrees in brain-frazzling subjects such as partial differential equations, probability concepts, stochastic calculus, and Brownian motion.

Their brilliance was necessary for trading of equity derivatives, though Paille had even grander ambitions for his squad of geniuses. Recalling his days writing software, Paille knew he needed custom-designed computer programs to achieve financial domination, and in order to create these complicated programs, it required the smartest people he could assemble. Together they formed an exclusive club, and if you hadn’t graduated from one of France’s grandes écoles , you need not apply. They were the modern day moines-soldats .

But at Société Générale, the soldier monks were characterized by more than just their intelligence. They were, like the group they were named after, fanatic in their devotion to their work. They were known throughout the company as being possessed by their jobs, going far beyond the generic classification of workaholics. “We considered it a mission,” Paille said of his group. And of course, they were intellectual beyond compare, reveling in complex theories and pricing models. A favorite saying amongst les moines-soldats  was, “It may not work in practice, but it does in theory.”

That dedication and drive earned them quite a reputation throughout the industry. And, as their reputation grew, so, too, did their confidence. Working in fourteen-hour shifts from 8:00 am until 10:00 pm , the soldier monks designed, programmed, bought, sold, and traded some of the most complex financial instruments ever to be assembled into equity derivatives. The instruments obviously carried substantial risk, but the soldier monks knew their superior intellect had enabled them to manage that risk, primarily through their complex computer models and risk management systems.

As the business grew and technology advanced, the group added computer systems fast enough to process these complex risk models in real time. That, combined with the brainpower they had accumulated, allowed it to make more money in equity derivatives than any other bank in the world. Whereas other banks sometimes had down years, the soldier monks at Société Générale only had down months. Two of them, to be exact, in the span of fifteen years. These soldats  wore their success like the cross of the Knights Templar, and they dominated the trading floor.

Despite its apparent successes later on, the options trading group was a somewhat obscure team up until the late 1980s; at least until the traders got their first big break. France’s equivalent of the U.S. Export-Import Bank, Compagnie Française d’Assurance pour le Commerce Extérieur, wanted to buy some currency options to hedge its risk, so it sought out prices from all of the French banks. SocGen easily won the trades, which put its business on the global map.

More recognition came when the bank added interest rate and equity options, which in turn, continued to grow the profits at the bank. An industry-leading business was great for the bank, but it also resulted in a flurry of job offers for the soldier monks, and Paille started to see his team slowly diminishing. Though the team’s dedication to the job was legendary, members’ loyalty to their employer was most definitely for sale. In an effort to stem the exodus, Paille approached Société Générale’s top executives and proposed a profit-sharing plan that would have rewarded the top traders, effectively giving them an equity stake in the business. The executives, however, rejected the proposal.

Frustrated by the steady loss of traders and his inability to tie their long-term interests to that of the business, Paille departed Société Générale and went over to Frankfurt, Germany, where he set up the derivatives unit at Commerzbank AG. The leaders at Société Générale, in turn, reorganized the importance of the derivatives unit and created an entirely new division—this time headed by Jean-Pierre Mustier, one of Paille’s earliest disciples on the soldier monk team.

Mustier’s takeover preserved the exclusivity of les moines-soldats , a designation that was still not open to outsiders. They were doing, after all, supremely complex work, so naturally only those who came from the right background and studied at the finest of schools were still allowed in. Surprisingly though, it would take a middle-class kid from a small fishing village in Brittany to crack the glass wall surrounding the soldier monks. That young man from the provinces would prove that brains were no match for cunning. His name was Jérôme Kerviel.

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Jérôme Kerviel was born in Pont l’Abbé in Brittany, France, a small coastal town with a full-time population of about eight thousand. The source of the town’s income came from fishing and tourism, neither of which appealed to Jérôme. His father was a blacksmith who also taught a metal shop course at the local school, and his mother was a hairdresser. Again, neither profession beckoned. The bright lights of Paris and the money to be made in its financial district were quite the lure for his young mind. But that required an education.

Kerviel earned his undergraduate degree from the Université de Nantes and his master’s from the Université Lumière in Lyons. Neither of them could ever be considered grandes écoles , and both schools were somewhat looked down on by those from the superior schools. His education would do nothing to improve the image of a country bumpkin from Brittany around the halls of SocGen; it only solidified that he was not part of the French elite.

But Kerviel still managed to land himself a position in the middle office at Société Générale in 2000. He did what he could to improve his image by dressing well and was known to be polite and helpful around the office, two characteristics not typical of top traders who moved both Heaven and Earth. The middle office wasn’t the trading floor to be sure, but those coveted spots were reserved for the hypereducated, a group Kerviel would never be a member of.

Working in the middle office was tedious, as its name suggests. The position itself is stuck in the middle, between the trading floor and the back office. He was essentially a liaison between those who executed the trades and those who processed them. He and his middle-office colleagues were the primary point of contact for anyone with questions about the traders’ activities. His days consisted of generating reports, calculating profits and losses, inputting trades, reconciling errors, and performing other relatively mundane, menial tasks.

In 2002 things started looking up for Kerviel when he was offered the position of assistant trader. It was a significant a step up from the middle office, because now he was doing work related to securities trading. His main responsibility was entering the traders’ orders into the computer processing system, but it was more engaging than merely typing in trades. Most importantly, he had a seat on the trading floor. That also afforded him access to the proprietary trade processing system that SocGen had developed called “Eliot.” He learned firsthand about risk management and the trading monitors that the bank employed, and in future years, he would put all that learning to his own personal use.

In 2004 fate once again smiled on Jérôme; he was promoted to junior trader and assigned to the Delta One trading desk in the equity derivatives division, a trading desk that was rapidly rising in importance at SocGen. Though he still wasn’t part of the elite moines-soldats  club—not yet, anyway—he was at least rubbing elbows.

The word delta means change, and in investing terminology a security’s delta is the change in the price of an option relative to a change in the price of the underlying security. In other words, given a move in the price of a security, it’s how much of a nearly identical move will result in the price of the option. A delta of one means the options price moves one for one with the price of the underlying security. These were options that were considered the most plain vanilla—that is, with the least risk associated with them—and they were the primary products that the Delta One desk at Société Générale traded.

Remember, options give the investor the right—not the obligation—to buy or sell a security or an index at a given price by a given future date. Typical options are “calls,” which give the investor the right to buy a security, and “puts,” which give the investor the right to sell a security. Equity derivatives, too, are typically made up of options. Antoine Paille, the father of les moines-soldats , loved trading these kinds of options, as they “seemed to unite math, statistics, and computers.” In other words, they embodied everything he loved about finance, all in one convenient package.

Delta One trading desks are frequently defined as trading financial products that have no optionality. The delta of one. Their products often incorporate baskets of securities wrapped up into a single instrument. Examples might include things like swaps based on a group of stocks, stock index futures, and exchange traded funds (ETFs). Most Delta One desks have a trading business in equity index arbitrage—exploiting the difference between the prices of the individual stocks within an index and the stock index futures; this tends to be their main source of revenues.

A “typical” Delta One trading desk can be difficult to define, however, simply because there is no real definition. The desks often encompass a broad range of trading activities that vary from bank to bank, and their position on the trading floor varies along with their activities. They’re either situated as part of the equity finance division or the equity derivatives division within major banks. At SocGen, the group was part of the equity derivatives division.

The primary products traded on Kerviel’s Delta One desk were warrants. They are basically long-term options on stock indexes or baskets of stocks, and just like an option gives the owner the right to buy or sell a particular security, the warrants give the same right, except it lasts for many years or sometimes never expires at all. In the overall scheme of things, regular warrants are notoriously unsexy when it comes to financial derivative trading groups, like SocGen’s. They were still plain vanilla and predictable, just like regular options, and what a mathematician might call linear. Given that, they were not very intellectually challenging for the soldier monks at Société Générale, who preferred to flex their mental muscles and demonstrate their intellectual superiority in more complicated areas of derivatives. At SocGen, parts of the Delta One trading desk had moved well beyond these plain-vanilla options into increasingly more complex and exotic instruments called “turbo warrants.”

Turbo warrants were the SocGen Delta One desk’s preferred instrument because they’re what are classified as “barrier options.” A barrier option is a form of an option that becomes active or inactive when a specific price “barrier” is reached. For example, if a customer owned a large amount of German stocks and wanted to be protected from a large drop in the DAX, the customer might buy a turbo put warrant from Société Générale. That option only became active—meaning exercisable, or sellable—if the DAX’s value dropped below a particular price. The turbo warrant doesn’t really exist until a certain price is broken by the index.

On top of all of that, turbo warrants come in a variety of permutations, which made them even more attractive to the intellectually elite moines-soldats . For starters, they come in both longs and shorts. A long turbo—nicknamed a “down-and-out call”—is a contract to buy the financial instrument, which might only become active after the index has moved 10 percent higher or 10 percent lower. Alternatively, a short turbo—also known as a “down-and-out put”—allows the customer to bet on the price of a security falling, but only once the barrier price is hit. Yet another subset of turbo warrants are called “knock-out options.” If the preset price barrier is reached, the option expires worthless; it gets “knocked out.”

For sophisticated buyers, all of these types of turbo warrants allowed them to bet on a change in the price without having to pay as much premium for it. Customers will often purchase long or short turbos because they’re cheaper than regular options. Given that the options are not active until the stock price rises or falls substantially, a customer can find a way to hedge large moves in the market without paying that much for it. They can serve to protect an investor from some calamitous event that sends stock prices plummeting, or alternatively, skyrocketing.

Buying and selling of options is complicated enough on its own. With turbo warrants, the equity derivatives group at Société Générale began bundling all kinds of different options into single instruments. There were options to buy or sell based on whether the market trades at certain levels. That means there are many layers of options built into one financial instrument. On top of that, les moines-soldats  were putting these turbos together for a whole variety of underlying instruments, including baskets of stocks, ETFs, stock index futures, and indices like the DAX and the Euro STOXX 50. It took an incredible amount of mathematical equations to price a single transaction.

It takes a keen understanding of advanced mathematical concepts to adequately map out the intricacies of these sorts of instruments—it’s no wonder that the soldier monks at Société Générale loved their work. Calculating an option’s price is itself a mathematical exercise, and a complex one at that. But calculating the price of an option conditional on another price level or that became active or inactive based on certain events is even more complicated.

One thing that’s more or less standard for a typical Delta One desk is that it’s typically a low-risk operation, meaning there’s less price volatility that arises from large moves in the markets the desk trades. When they did have risky trading positions, those trades were always hedged in one way or another. For that reason, the Société Générale Delta One desk seemed like the perfect place for a newly anointed trader, such as Jérôme Kerviel, to cut his teeth.

The DAX and the Euro STOXX 50 were the two main stock indexes traded on the SocGen Delta One desk—they’re what Kerviel focused on. DAX, an abbreviation for Deutscher Aktienindex, is a blue-chip German stock index composed of thirty major German companies traded on the Frankfurt Stock Exchange. Included in that index are such world-renowned companies as Adidas, BASF, BMW, and Deutsche Bank. The DAX is essentially the German equivalent of the American Dow Jones Industrial Average.

The Euro STOXX 50 index is much the same thing, except a little different. It encompasses fifty stocks from eighteen European countries, and includes some of the same stocks under the DAX umbrella. Just as the DAX is the blue-chip stock average for Germany, the Euro STOXX 50 is the equivalent average for all of Europe.

Kerviel’s assistant’s job eventually progressed to that of turbo warrant trading. In that role, his primary job was to buy turbo warrants that were issued by other banks, a process known as “turbo warrant arbitrage.” Because the traders at SocGen knew they had the best pricing models in the world, the soldier monks liked to buy turbo warrants issued by their competitors, just knowing that the other banks often mispriced all the complexities involved. It was a lucrative business, to be sure—yet also another way for les moines-soldats  to demonstrate their intellectual superiority.

Then in 2005 something that had previously been unthinkable happened: Kerviel was promoted to the full position of trader. He had longed for the chance to join in on the more complex trades, but now he was officially in the world of les moines-soldats —the trading position that was once reserved for only those with the best upbringing and education. In short, Kerviel entered the world reserved for the graduates of the grandes écoles .

He had beaten the odds and received the promotion, which also came with a first-year salary and bonus of € 100,000. Though that amount was still considered low for an experienced derivatives trader, he knew he was fortunate to get the position at all. Kerviel said of his newfound status: “I was aware, starting from my first meeting in 2005, that I was less well considered than the others, [regarding] my university degree and my professional and personal background. I had passed through the middle office, and I was the only [trader] to have done that.”

Though he still wasn’t truly one of them, Jérôme Kerviel was determined to be accepted into the ranks of les moines-soldats . In the space of the next couple of years, they’d do much more than just notice him. They’d come to revile his very existence.

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Beginning in July 2005, Kerviel began his initial foray into unauthorized trading. He started by buying shares in Allianz, a German firm focused on insurance and asset management, which amounted to approximately ten million euros worth of the stock. As the month progressed, he switched his long into a short on July 21, and the trading position was discovered. Kerviel was verbally reprimanded by his boss for having an unhedged position, and he promised to rectify the situation, selling out all of the shares altogether.

The main problem with his trading position, at least from the company’s perspective, was that it was completely unhedged. Kerviel was allowed to have trading positions—that’s what you’re supposed to do on a trading desk—but SocGen didn’t want them to take market-directional risk. If the Allianz stock price started to tank, Kerviel could easily book a large loss, and that wasn’t the company’s business. Taking a large trading position was OK, as long as it was hedged with another position. In the future, Kerviel needed to have a safety net when he was getting long or short in the market.

The lesson he learned from the slap on the wrist wasn’t necessarily what his boss had in mind. It was the risk management group that had caught Kerviel’s imbalance and alerted management. Kerviel now knew that as long as he booked unhedged trades, the risk-monitoring system was going to send up red flags. But because Kerviel had an insider’s knowledge of the software, he knew exactly how to beat it.

The real lesson Kerviel learned from his boss was that he needed to hide his activities a little better. Of course, the best way to avoid the warnings was to have positions that looked like they were hedged. Kerviel had ideas of what to do. The best way to show the intellectual snobs that he was their equal was by banking huge profits, something he couldn’t quite do with low-risk hedged trades. So he faked it. He just booked false trades that showed a hedge for something like his Allianz stock in the risk management system, thereby pacifying the system into thinking that he was doing what he was supposed to.

Right after he was reprimanded, a tragic event took place in London that happened to make him a lot of money. On July 7, 2005, suicide bombers had detonated a coordinated series of explosions throughout the London mass-transit system during the morning rush hour. Fifty-two civilians were killed in the attacks, and several hundred more were injured.

In addition to the loss of life, the event sent huge shockwaves rippling through the financial markets, including a drop of more than 200 points on the FTSE 100, the stock market index for the London Stock Exchange. Kerviel, however, was one of the few people smiling following the sell-off, because his short position was suddenly in the money. The profits the new trader booked so pleased his bosses at Société Générale that they rewarded him with larger trading limits.

With the power to trade more and take on more risk, Kerviel continued trading the stock markets over the course of the next year. However, these larger trading limits didn’t satisfy his need to increase his trading position even more. If his trading position was getting a little too large, Kerviel would just pass an offsetting trade to hedge it. Anytime he needed a hedge to offset some risk, all he did was book a false hedge in SocGen’s system. By August 2006, his trading positions were up to approximately € 140 million worth of DAX futures contracts, with fake trades posted in the system to hide the true risk.

It was a pattern that would repeat itself many times over the next three years. From 2005 until 2008, Kerviel booked phantom hedges for his trading positions more than 947 times, all for the sake of convincing the computer that he wasn’t doing anything outside of his authorized limits. Most of those trades were in single stocks; they totaled anywhere from € 15 million to € 135 million a trade.

Since Kerviel’s manager knew the market and the trading system pretty well, Kerviel was still limited in his ability to exceed his limits. He’d spent the better part of two years trying to buck the system, only to be reprimanded if his trades got too large, even with the false hedges.

But all of that changed on January 11, 2007, when Kerviel’s boss resigned his position as deputy head of the Delta One desk. He was replaced by Eric Cordelle, a man with no experience whatsoever in Delta One trading operations. It was akin to discovering a gold mine in his backyard for Kerviel, who immediately seized upon the opportunity presented by his new supervisor’s ignorance.

It was a typical practice within the ranks of SocGen to move managers from one location to another, from one product line to another. It was looked at as something of a training exercise, a way to build knowledge and experience for its future top executives. Prior to coming to the Delta One desk, Cordelle had been in Japan, working in the Société Générale credit engineering and derivatives group.

At the age of thirty-four, in fact, Cordelle had no real experience in trading at all, let alone trading index derivatives and warrants. The only real qualification he could point to as a trading desk manager amongst les moines-soldats was his diploma in engineering from one of France’s grandes écoles . In short, he knew nothing about his new assignment as deputy manager of the Delta One trading desk, a fact he offhandedly acknowledged when he said, “I was named to the position after five years in Tokyo spent on financial engineering.”

Cordelle’s limited qualifications were, ironically, exactly the help that Kerviel needed in order to establish himself among the ranks of the elite soldier monks. Not only was his new boss not familiar with the products they traded—he also had no understanding of the trade processing or risk management systems. And those were two clear advantages that Kerviel had. The way he saw it, he now had a green light to trade any way he wanted.

It’s been said that sometimes it’s better to be lucky than good, and Jérôme Kerviel embodied that saying in 2007. By the end of January, the first two weeks under his new, unsuspecting boss, Kerviel had built up a large short position in DAX index futures, hovering around € 850 million. Within just a few weeks later, that number had mushroomed to € 2.6 billion. By the end of March, Kerviel more than doubled his short position to what appeared to be a staggering € 5.6 billion. Within just a few months of his new boss taking over, Kerviel’s short position in stock index futures would grow even larger.

During the earliest part of 2007, the European stock markets were generally moving higher, and Kerviel was losing money, but he kept adding to his short position. It was the same story told by failed gamblers throughout the world, doubling down on bets, hoping for a change in luck. As the snowball of losses continued, so too did the size of the phantom hedges he needed to stay under the radar. Pushing through the first five months of 2007, Kerviel’s losses were running around € 2.5 billion at their peak.

By June 2007, Kerviel’s short position in equity indexes had grown to a monumental € 28 billion, and the sheer size was beginning to take its toll on the trader. “From dawn till dusk, I would stare at the screens, trading enormous amounts and hardly getting any sleep,” he said. He was at the breaking point. Unless a drastic move took place, he would have to book an immense loss, not to mention losing his job. Kerviel was at the end of his rope, with everything about to come crashing down around him.

History, however, was lucky enough to repeat itself for Kerviel, who once again profited from a major catastrophe. Fears of subprime debt crisis in the United States and the collapse of the housing market led to the collapse of several overleveraged hedge funds, including Bear Stearns Asset Management, some BNP money market funds, and Sentinel Capital Management.

They were the first three dominoes to topple in the financial panic that would continue to sweep the globe through 2007 and into 2008. This time, however, all Kerviel cared about was the fact that the panic had saved him. His short DAX futures position on July 19 was just above € 30 billion, and the market sell-off had turned the titanic negative into a positive. As Kerviel explained, “In July, the market had its first panic attack, and I was able to pull out with a gain of five hundred million Euros.” Expecting that this initial sell-off was the depth of the crisis, Kerviel bought back the remainder of his shorts by the end of August. His timing was perfect and he made an incredible amount of money.

Kerviel’s market sentiment continued to be negative, and by September, he was amassing another massive short position in equity index futures. By the end of October, he was short up to € 30 billion again, and when the market continued its decline after a brief rally in October, Kerviel bought back most of his short with another large gain in November, resulting in a profit of close to € 1 billion for the year. For the next two months, he worked to unwind the remaining positions in the DAX and Euro STOXX 500. “I wouldn’t even go outside to get something to eat,” Kerviel recalled of the last days of 2007. By the end of the year, his short positions were all covered, and his exposure was down zero.

On that December day when Kerviel finally closed everything out, his trading assistant sent him an e-mail with the subject “Valo JK + EUR 1,464,129,153.” In layman’s terms, that translates roughly to “Jérôme Kerviel Positive € 1.46 Billion.” Clearly his trading assistant knew how much the trader had made, at least on his real trades. But there was no way for Kerviel to admit that to anyone else. After a trading year like that, he could expect a year-end bonus of as much as € 147 million, assuming he got paid the standard 10 percent of trading profits favored by many banks. However, in order to claim the profits, Kerviel would be forced to admit his trading escapades over the past year. First and foremost, Kerviel would be admitting much more risk taking than he was allowed, and on top of that, covering up those positions to avoid detection.

Kerviel was stuck in what can only be called an ironic twist for a trader. Rather than boast about the nearly 1.5 billion euros he made, he had to hide it, showing only a sliver of what he’d actually made. After putting through some false trades to book some losses, Kerviel reported a profit in his trading account of € 18 million for the year. It still put him on the top of the list of traders at SocGen. On the Delta One desk, he had single-handedly accounted for 22 percent of the profits generated from proprietary trading and 40 percent of the profits generated from trading with customers. He had finally achieved the elusive status of elite trader and, one assumes, the respect of his now fellow soldier monks.

*   *   *

How can a man of modest educational achievement and background fool a system created by some of the most brilliant minds in the country? It was, at its core, where the cunning of one man was able to outwit the most advanced risk models. The risk system developed by those grandes écoles graduates, those moines-soldats  who so prided themselves on their intellectual superiority, had a flaw. They didn’t account for somebody falsely manipulating the system from within their ranks.

For starters, Kerviel was intimately familiar with the trade processing system and knew exactly what transactions he could easily hide. Jean-Pierre Mustier said of Kerviel’s activities, “He chose very specific operations which were not involving any cash movements.” Unlike some of his fellow rogue traders, Kerviel didn’t steal or otherwise misappropriate money to hide his trades. He just lied about what he was doing—and the computer had no way of knowing it.

There were three specific methods that Kerviel employed to fool the SocGen system. First, as we know, he booked fictitious trades as a way of hedging the risk impact of his trading positions. Regarding those phantom trades, the computer was taking on faith that the person entering them was telling the truth. The system accounted for them as actual trades when calculating the risk and the profit and loss. It was a simple process for Kerviel, especially due to the fact that he knew the trade processing system inside and out.

Specifically, Kerviel knew that if a trade was booked as “pending,” there was no need to enter the name of the counterparty. The system was programmed to check for pending trades on a regular schedule, and Kerviel knew the time of day when that check took place. So he was able to book trades right ahead of the scheduled time, and then cancel them afterwards.

The second part of his manipulation was to hide profits, and at times, hide losses. It involved booking fictitious trades to offset whatever outsized returns he shouldn’t have been able to make. Kerviel booked matching buy-and-sell trades with equal quantities of the same security, but at different off-market prices. For example, on March 1, 2007, Kerviel booked the purchase of 2,266,500 shares of Solarworld at a cost of € 63.00 per share, at the same time a sale of the same number of shares at € 53.00. Both transactions were booked to settle at a future date, meaning they qualified as pending sales that didn’t require a counterparty to be entered. The end result was a loss—albeit a fictional one—of € 22.7 million with no real position in the stock ever established in the first place.

The computer system didn’t identify the € 53.00 share price being way off the market. Kerviel knew the forward settlement date would throw the system for a loop, meaning that it wouldn’t find anything wrong with the trade. Kerviel would later cancel the trades after the system had checked for pending transactions, just like he did with the other trades. “He managed to place transactions which did not require immediate confirmations,” Mustier later said, as a way of explaining the young trader’s strategy.

Finally, Kerviel was able to make adjustments to the risk models to further insulate himself. By modifying the option pricing calculations that were supposed to be reserved for the trading assistants—but which did not prohibit the traders from doing it—he would change the option pricing model to fit his needs. Again, relying on the knowledge he acquired during his earlier days in the middle office, he’d adjust the volatilities used in the models to alter their calculations. Because options prices are very much determined by market volatility, changing the volatility number easily created the false profits or losses that he needed to cover his tracks.

When all of this was said and done, the amount of Kerviel’s fraudulent activity was quite large. The final tally included 947 fictitious trades, 115 transactions designed to hide profits, and nine fraudulent adjustments to risk models.

*   *   *

Things began to unravel for Kerviel in the summer of 2007, when someone was doing some fact-checking and noticed that a counterparty didn’t check out when they called them. Kerviel responded to the inquiry with a succinct, “No problem.” He later produced a fabricated e-mail ostensibly sent from Deutsche Bank that confirmed the fake trade. Just like his reliance on booking fake trades, so too would he use forged e-mails. Whenever confronted with questions about his activities, Kerviel provided excuses that he backed up with forged e-mails.

Later that summer, Kerviel was again confronted by a risk control officer concerned with what appeared to be trades in turbo warrants that far exceeded his limitations. Again he replied, “No problem.” This time, however, no e-mail was going to support his insouciance. At a meeting where his positions were collectively discussed, Kerviel produced a cleverly crafted report with charts showing that everything was actually within the limits. Claire Dumas, the deputy head of Cash & Equity Derivatives Operations at the time, said of his work, “He fooled us that way. His documents were so nice.”

Eyebrows were again raised—though not enough to prompt further investigation—when Société Générale’s futures broker, Fimat International Banque, regularly placed many of Kerviel’s futures trades in its own account prior to moving them into Kerviel’s account at Société Générale the next day.

Moussa Bakir was Kerviel’s futures broker at Fimat in London, and Kerviel and Bakir had what can only be characterized as a close—and somewhat strange—relationship. One element was the fact that Kerviel paid Bakir very large futures brokerage commissions. At the end of 2007, that amount totaled approximately € 6.2 million, and Bakir could be personally expected to take home as much as 40 percent of that. Combined with the fact that Bakir seemed to be booking many of Kerviel’s futures trades himself, Bakir had extensive knowledge of Kerviel’s activities.

Eventually, the size of Kerviel’s futures trades caught the attention of the authorities at the Eurex, one of the major futures exchanges in Europe. In November 2007, Eurex sent two different letters to Société Générale questioning Kerviel’s trading activities. The exchange seemed to know that something was wrong, but couldn’t quite put its finger on it. On one occasion, Eurex representatives wanted to know why Kerviel had purchased nearly € 1.2 billion worth of DAX futures contracts in the span of only two hours. Then, they wanted to know if the trades were booked electronically or manually. In the second inquiry, they also asked why trades were initially booked into Fimat’s account instead of the account of SocGen.

The questions from the Eurex exchange led Kerviel to take additional steps to cover his tracks, steps that led him into a part of the risk control system that he was unfamiliar with. It was a risky move by Kerviel, but the letters from the Eurex had spooked him, and he didn’t have the luxury of time to familiarize himself with that part of the system. In the end, that move would be his undoing.

*   *   *

On Wednesday, January 2, 2008, a brand new trading year prompted Kerviel to jump into a large number of DAX futures contracts. To offset his risk, he input eight phantom trades of turbo warrants on the DAX index that totaled € 1.5 billion. The phantom trades were designed to be his hedge, trades he had supposedly done with Deutsche Bank. He sent the trades to the back office as “pending,” including a message that read, “We will put the broker in anticipation of the counterparty conf.” In other words, the trade would be finalized when the counterparty sent the confirmation. But given that the trade was fake, obviously that would never happen.

Throughout 2007, Kerviel had appeared to be spending the days and nights at his desk, trading the markets, trying to make money for the bank. In reality, he was  trading the markets, but also working feverishly to conceal his oversized positions and book his fraudulent trades at just the right time. During the course of the year, Cordelle had suggested numerous times that Kerviel take a much-needed holiday. However, the star trader on the Delta One desk used the excuse that he was too upset by the recent death of his father. He was just happier staying around the office and working. The truth is, he was incredibly afraid of getting caught, and he knew his time was running out.

On Tuesday, January 8, an employee in the back office noticed the extremely large turbo warrant position with Deutsche Bank, which, of course, really didn’t exist. Concerned that something was booked wrong, the employee asked Kerviel for an explanation. “This materializes the give up of puts made late; I owe money to the counterparty. It will be rebooked ASAP,” Kerviel wrote in a cryptic reply. It was as if he’d pulled out a financial dictionary and chosen words at random. The back-office employee would later admit that he had no idea what the message meant. But it was accepted as trader-speak, something that made sense to someone smart enough to be in Kerviel’s position.

Kerviel then canceled the transactions the next morning, telling the back office that they would no longer appear in the system. He then instructed his trading assistant to adjust in the options volatility calculation early the next morning, which would hide the P&L impact of his trades. The next day, everything seemed fine. The back office confirmed that the problem that was noticed earlier had been resolved. Problem solved once again.

A few days later, on Tuesday, January 15, the accounting department ran its reports for Société Générale’s regulatory capital usage. Accountants noticed that there was a very large amount of capital ascribed to Deutsche Bank in OTC derivative trades: “Turbo warrants.” Then, they inquired to the back office as to the source. The back office simply replied that the trades were canceled. It appeared the whole issue was a moot point.

As the day progressed, the bottom dropped out. January 15, 2008—nicknamed “Black Tuesday” by some investors—saw the global equity markets plummet. Many financial institutions saw their stocks slide on fears of the U.S. subprime mortgage crisis, as the entire U.S. housing market was under stress. The Dow Jones Industrial Average closed at 12,778 that afternoon, but it would drop a full 17 percent—all the way down to 10,578—in just a matter of seven days. The German DAX followed suit, losing 11 percent of its value over the same period.

Kerviel was already on the brink of discovery, and now he had just lost his shirt on his DAX futures contracts.

At 4:30 pm  on Thursday, January 17, Kerviel was called into a meeting. Both the risk department and the accounting department had problems with the canceled trades with Deutsche Bank. For starters, the accounting department claimed that Deutsche Bank had no record of the cancellation. Kerviel had an easy explanation for it. He seemed to have somehow booked the wrong counterparty into the system. It was obviously his fault, and he was really sorry for the mistake. He assured them that he’d correct the error and list the correct counterparty for the canceled trade.

Immediately following the meeting, Kerviel got on his computer and began an instant messenger conversation with Moussa Bakir at Fimat. “You didn’t say anything about our trades, did you? Otherwise, you’re dead meat,” Kerviel warned Bakir. “Well I’m finished.”

Bakir replied, “What do you mean?” It was an odd response to the message Kerviel had sent him. When pressed by Bakir to explain what he meant, Kerviel told him to “forget it.” But obviously something was wrong. Whatever that something was, Kerviel wasn’t saying. As if Kerviel didn’t have enough to worry about, he was long the DAX to the tune of € 49 billion, and the market was crashing. Soon, he’d have no possible way to recover.

The next day, the Deutsche Bank trade didn’t go away. A person in the accounting department was looking at the sheer size and found Kerviel’s explanation to be highly suspect. He decided to dig a little deeper and consulted someone in risk management. She found that Kerviel had, in fact, canceled all of the individual trades a week earlier. There was still an issue that bothered her. She couldn’t find any evidence of a confirmation of the canceled trade from Deutsche Bank.

Together, they phoned Kerviel, who again apologized for his oversight in listing the wrong counterparty on the trade. He then gave them the name of a trader at another bank who was supposed to be the correct counterparty, and hung up the phone. He must have known it was over. Kerviel got on his instant messenger to Bakir and said, “My last day here.” Bakir returned with the suggestion to “cut the position,” to which Kerviel replied, “Shit, I am dreaming of it every day.”

That afternoon, Jérôme left for the weekend. Clearly, he knew he was through. He’d been chained to his desk for months, trying desperately to save himself from detection, and now he was leaving the office and going to Normandy for the weekend. His plan was to spend some time relaxing at the resort of Deauville, often called “the queen of the Norman beaches.” However, by the time he arrived at the resort, investigators at Société Générale were uncovering the truth about his trade with Deutsche Bank.

There was no rest for the weary on Saturday, as executives continued to scour Kerviel’s trades. They were convinced that something was very much amiss. Early that morning, a SocGen manager discovered that the reason Deutsche Bank never sent a confirmation cancellation was because the bank knew absolutely nothing about the trade in the first place. That revelation cut Kerviel’s vacation short, and he was summoned back to the office immediately by the head of SocGen’s investment bank, Jean-Pierre Mustier. Kerviel needed to explain exactly what was going on.

While he was in transit, the investigators finally uncovered the truth about Kerviel’s earnings—specifically that he’d banked € 1.4 billion in the course of 2007, an amount that far eclipsed the amount he originally reported. That in itself made absolutely no sense to anyone in the room. Why would a trader, who gets paid on his performance, downplay his own success? Confusion reigned supreme.

When Kerviel arrived at the office, he was immediately questioned by Mustier about his earnings. “If you really earned [so much],” Mustier is reported to have said, “what you did is annoying, but it’s not major.” In other words, he was willing to turn a blind eye to Kerviel exceeded his trading limits, assuming he made that much money for the bank. Again, the question as to his motive remained.

Another source reported that Mustier was not so enthused by the trader’s actions, and was more forceful in his statement. “You have broken the rules,” the source reported. “You understand that we can’t keep you.” That was a nice way of letting Kerviel know he shouldn’t expect to be on the payroll on Monday, but the news came with a silver lining. “But don’t worry,” Mustier continued, “my wife works for a hedge fund. She will easily find a job for you.”

Regardless of which version of the story is accurate—or if the truth lies somewhere in between—it was clear that under the best-case scenario, Kerviel had massively violated company policy, and his subterfuge was not appreciated. Worst-case scenario, his career at Société Générale was not going to last much longer.

The midnight oil continued to burn on Sunday, when an emergency meeting convened of the Société Générale board of directors to discuss the Kerviel matter. At that meeting, Daniel Bouton, the SocGen CEO, offered to fall on his sword and resign as a way of taking the blame. His offer, however, was rejected by the board. After the meeting, Bouton called all of the firm’s traders into the office to tell them what had happened. It was assumed that they would keep quiet about the matter, and, it was hoped they would close out any of their own positions affected by Kerviel before the news broke. His long DAX futures contracts would be liquidated beginning on Monday, an action that would clearly drive down the already sagging equity markets.

However, it didn’t take long for the news to become public. One London trader said, “By Monday, all of Paris knew that SocGen had a massive overhang and was going to be selling, although I don’t think anyone knew how big it really was.” Nobody outside of the inner sanctum of Société Générale, that is. At the same time, Fimat flew a flock of legal and compliance staffers to its offices in London and Paris, charging them with investigating the relationship between Kerviel and Bakir.

Bouton knew his bank was positioned precariously on the edge of a cliff with a very, very long drop. He pleaded with the Financial Markets Authority, the French regulatory body, to allow Société Générale time to liquidate the positions and to raise new capital prior to announcing the situation. “It would be very dangerous to announce this fraud without also showing an appropriate response,” Bouton told the regulators. It was a request that, while veiled in sanctimonious altruism, leaned towards his own self-interest. The CEO wanted to cover his own ass before dropping this bomb on the rest of the financial world.

The request was granted, with the stipulation that Bouton and Société Générale only had three days before the stock exchanges were officially informed. While it was a temporary stay of execution, it didn’t help much. Rumors were already running rampant through the markets that SocGen was liquidating a large equity position, a rumor that led to a massive sell-off in the global equity markets on Monday, January 21.

The rumors weren’t something that Bouton concerned himself with, as the clock was already ticking on his three-day window. He contacted both J. P. Morgan and Morgan Stanley, who both agreed to raise the money Bouton needed. They committed to provide Société Générale with € 5.5 billion in new capital.

Meanwhile, a SocGen employee named Maxime Kahn worked frantically to unwind the positions between Monday and Wednesday, desperate to unload everything before the news was made public. Kahn worked alone in a private room, and he later swore at the trial that the only positions he was selling had belonged to Kerviel.

The news was passed to the stock exchange as scheduled, on Wednesday, January 23, and the immediate response from the French government was one of outrage. When French Finance Minister Christine Legarde and French President Nicolas Sarkozy were informed, Sarkozy was furious that Société Générale executives had waited three days—five, if you counted the weekend—to tell him about the massive fraud. It was, to his mind, an unconscionable act of dishonesty.

The press got the news late Thursday, and Friday’s papers carried the story to varying degrees. The Telegraph reported that a “mystery trader” who’d been involved with trading the European indexes had made unauthorized directional bets. Société Générale followed up with an announcement that it estimated the loss to be approximately € 3.6 billion, and a trader named Jérôme Kerviel, age 31, was solely responsible for the massive debit. Even Nick Leeson of Baring Brothers infamy got in on the act, applying his own perspective to Kerviel’s situation during an interview on an Irish radio station: “I would imagine that there would have been a perverse sense of relief, because he has not been able to bring it to an end himself.”

Whether or not Kerviel felt any sense of inner peace was never revealed. Kerviel was immediately suspended from his job at SocGen. He holed up in an apartment in Paris and didn’t leave for days. It was probably best for him to stay concealed, because the losses for Société Générale continued to mount. When the final tally appeared, Kerviel’s positions had lost a whopping € 4.9 billion after the liquidation. The loss also included the € 1.4 billion in profits that he’d previously tried to hide. In other words, Société Générale had, at the hands of Kerviel, unloaded positions that had cost the company € 6.3 billion. Jean-Pierre Mustier said of the unfortunate result, “I cannot deny that if we had not been selling, the market would have fallen less.”

Kerviel was arrested by French authorities without incident on Friday, February 8, 2008. While in custody, he admitted to concealing his oversized trading positions. He claimed that he needed to hide the position because if the market had known of his € 49 billion position, widespread panic would have hit the market, resulting in massive losses. The authorities were not impressed with his excuse, and he was scheduled for trial.

In what was billed in France as the “trial of the century,” Kerviel attained something of an “people’s hero” status. The media cast him as a modern-day Robin Hood who sought to strike out against the fat-cat bankers of the world. He was also called “the Che Guevara of finance” and the “James Bond of SocGen” by other reporters, with T-shirts depicting the disgraced banker as a revolutionary who had successfully outsmarted the greedy bankers. It was widely speculated that Kerviel wasn’t the only guilty one at SocGen, just the scapegoat. Many reporters publicly wondered if his status as interloper amongst les moines-soldats  had made him the perfect scapegoat. Perhaps there was a much larger conspiracy within the hallowed confines of Société Générale.

At his trial, Kerviel’s lawyers portrayed him as a poor boy from the western province of Brittany, a wide-eyed and naïve young man who had moved to Paris to seek his fortune, and who was lacking in education but eager to prove himself in the world of high finance. Over time, he’d assimilated into what the lawyers called the “collective culture of faking trades” at Société Générale. He was not, they argued, engaged in an “individual intent to deceive.” In other words, his lawyers said that because everyone at the bank was doing it, he shouldn’t be found guilty.

Kerviel admitted under oath that he had violated company policy, but echoed his lawyer’s words that it was an accepted part of the firm’s culture: “I put fictitious trades in the system to hide my over-the-limits position because that’s what I had learned to do as a middle-office employee and then as an assistant trader at Société Générale.” He didn’t elaborate as to whether it was a skill he learned from other traders or simply something he had taught himself.

Adding to the increasingly murky waters was the widely held belief that Société Générale had done everything to make lemonade from the lemons that Kerviel had given it. During testimony, it was suggested that the bank had taken the opportunity to liquidate some of its own subprime holdings, as it had been losing money throughout 2007. The suspicion was that the huge loss—a staggering figure—was a combination of both the trader’s unauthorized losses and subprime losses that Kerviel was not associated with.

The court was not moved by any of Kerviel’s defense arguments, and he was found guilty on all counts in 2010. He was given a five-year prison sentence, with two years suspended. It meant that Jérôme Kerviel was to spend three years in a French prison.

But Kerviel did not go quietly. To this day, he argues that two senior traders on his desk—Martial Rouyère and Eric Cordelle—knew of his activities and the size of his positions, yet stayed quiet about it. He also criticized the way in which SocGen unwound his positions, citing the fact that it chose the worst three days of the sell-off in January to do so. Because of that, he believes he shouldn’t be personally held responsible for the loss. He is still convinced that the bank had taken the opportunity to unload its own holdings, bundling its losses with Kerviel’s. “The bank used what it says was ‘my’ loss to disguise other losses on other positions,” he stated.

While conspiracy theorists love the argument, the truth of the matter is somewhat less than helpful for Kerviel. If you consider that he was long about € 50 billion in stock indices, coupled with the fact that the DAX was down 11 percent during the week before the positions were sold, simple math tells us that a € 5 billion loss is just about right. And perhaps it was that simple math that prompted the court to order Kerviel to pay SocGen € 4.9 billion in reparations. It was the final insult to the spectacular fall from grace for Jérôme Kerviel.

*   *   *

Following the Kerviel fiasco, Société Générale immediately raised € 5.5 billion in new capital in February 2008 and spent € 130 million to tighten its internal risk controls. The bank was, however, fined for its failure to properly supervise its trader. In one sense, the bank was lucky that it was forced to tighten risk controls when it did, as doing so had saved the bank from much larger losses when the market really crashed just eight months later in September 2008. SocGen did go on to take more than its share of losses in fixed-income products, just like the other banks. The French government was adamant that the bank remain French, so there was no opportunity for an opportunistic buyer to swoop in and take over Société Générale, though there was rampant speculation that the bank would not survive independently.

Eric Cordelle, the former deputy head of the Delta One trading desk and Kerviel’s direct supervisor, left in April 2008, and was officially fired the next month for “professional insufficiency.” That label arose from the bank’s disbelief that he could sit next to Kerviel for eighteen months and not detect Kerviel’s fraudulent trading activities. He pleaded ignorance when asked about that, saying, “I think an experienced desk chief could probably have spotted Jérôme’s frauds.” The other label that he was saddled with—that of “Kerviel’s boss”—was one he couldn’t shake, and it kept him from getting another job in banking. Today he runs his own whiskey distillation business.

President Sarkozy pushed for CEO Daniel Bouton to resign, telling him, “When someone is very highly paid, even when it is probably justified, you can’t avoid responsibility when there is a major problem.” Bouton resisted that call, saying, “The board is asking me to stay at the helm of the ship during a storm. I am a man of duty. I am not going to jump overboard.” While an admirable sentiment, his stoic resistance didn’t last. He resigned on April 28, 2008. Jean-Pierre Mustier followed suit and resigned on May 30, 2008.

Moussa Bakir, strangely enough, suffered no ill effects from his association with Kerviel. He is still today a futures broker with Newedge, the firm created from the merger of Fimat with Calyon Financial in 2008.

As for Jérôme Kerviel, he is age thirty-five as of this writing. He appealed his conviction, but on October 23, 2012 the appeals court upheld the sentence, and he was ordered to begin serving it immediately—though he still remains free pending further appeals. He is still portrayed as a French Robin Hood and has been elevated to the status of folk hero in his home country. One out of every eight Frenchmen believes that Kerviel is innocent and that the bank made up the scandal. The theory holds that because he was not a real soldier monk, his coworkers turned against him to hide the firm’s larger losses. “My only objective,” claims the fallen moine-soldat , “was to make money for the bank.”