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France’s Societe Generale hit by fraud

One of France’s largest banks, Societe Generale, said Thursday it has lost €4.9 billion ($7.1 billion) through what it called “an exceptional fraud.”

Societe Generale, France’s second-largest bank by market value, after BNP Paribas SA, said the write-down and losses related to the trading incident will lead to a net profit of between €600 million and €800 million for all of 2007. The Paris bank said “One trader, responsible for plain vanilla futures hedging on European market indices, had taken massive fraudulent directional positions in 2007 and 2008 beyond his limited authority,” the bank said in a press statement. “He managed to conceal these positions through a scheme of elaborate fictitious transactions.” Societe Generale said the trader admitted wrongdoing and that “a dismissal procedure has been initiated.” In addition, his immediate supervisors will leave the bank, SocGen said. (Gazdasági Rádió, Moneyweb)