Jérôme Kerviel: from rags to riches to ruin

After six years of trying to avoid justice, the prison doors have finally closed on rogue trader Jérôme Kerviel. But as his tumultuous journey comes to an end, it’s difficult to assess the impact of the man’s convoluted legacy

Raised in a modest home in France's Brittany, rogue trader Jérôme Kerviel's rise to the top was as mighty as his crash down to earth
Raised in a modest home in France's Brittany, rogue trader Jérôme Kerviel's rise to the top was as mighty as his crash down to earth 

To some, Jérôme Kerviel is a modern day Robin Hood – a capitalist villain turned socialist crusader. After spending years in the warming glow of his own media circus, the former French trader has established a cult-like fan base that worships him as some sort of people’s weapon against financial tyranny.

Yet to most, Kerviel is nothing more than a common, white-collar criminal. From his work station in the back rooms of French powerhouse Société Générale, the junior trader ran up some €50bn in unauthorised trades – and by manipulating the system and betting against the odds, Kerviel brought his employer to the brink of destruction. Société Générale nearly sank after reporting losses of €4.9bn, and European markets went into complete and utter disarray. Inevitable calls for justice ensued. Yet the fanatical sideshow that followed has only served to make Kerviel’s story all the more extraordinary.

Despite losing appeal after appeal against Société Générale, Kerviel has always insisted he was a victim – a man of humble beginnings that had been corrupted by a severely flawed financial system. His former employers scoffed at the very notion; however, his defence has plucked some heartstrings among the French public. Even politicians appear to sympathise with the plight of history’s single-largest trade fraudster. Far-left leader Jean-Luc Mélenchon has likened Kerviel to Alfred Dreyfus, the man who suffered France’s most famous miscarriage of justice. Meanwhile, at the other end of the spectrum, Front National leader Marine Le Pen has conceded it’s a little farfetched to hold just one man accountable for the faults of an entire financial institution. Perhaps it was this muddled base of support that convinced 37-year-old Kerviel to seek out Pope Francis in the wake of his convictions, and set off on a long and arduous pilgrimage to imprisonment.

Jérôme Kerviel by numbers


Years worked at Société Générale


Amount lost in unauthorised trades


Distance walked to face arrest

A pat on the back
There was likely a time when Jérôme Kerviel wouldn’t have relished any degree of notoriety. He was raised in a small town in Brittany, where his mother was a hairdresser and his father was a blacksmith. He attended university in Nantes, and went on to earn a Masters of Finance at Lyon, specialising in organisation and control markets. Kerviel’s professors said he was an unremarkable student, kept his head down and did as he was told. Yet because of the university’s reputation among French banks for producing great middle and back office traders, Kerviel easily happened upon a junior role at Société Générale in 2000. He was given his first shot in the firm’s middle office, where he was handed the relatively mundane task of entering the details of others’ trades. Yet in doing so, he learned the ins and outs of the firm’s computer system – including how it could be manipulated.

Yet fraud was hardly the first thing on Kerviel’s mind. In his spare time, the backroom employee indulged in hobbies like judo and armchair politics. In 2001, the Mayor of Pont l’Abbé, Thierry Mavic, even convinced Kerviel to stand for a seat on his local municipal council. Kerviel lost the election, and decided to bury himself in work instead. At the time, Société Générale’s trading arm was expanding rapidly – and Kerviel said he was forced to double his efforts in order to keep up with the young men from better schools. Eventually, he began pulling 18-hour work days, and ended up giving up hobbies like politics and martial arts. Yet his hard work started paying off.

After nearly five years’ worth of all-nighters, Kerviel was finally promoted to a spot on Société Générale’s bustling trading desk, Delta One. The move was huge for Kerviel, but his workload as a junior trader was to be fairly monotonous. Kerviel was instructed to arbitrate small price differences between derivative contracts in order to earn modest amounts of money based on tiny margins. Bosses were alleged to have made quite clear Kerviel wasn’t to take bets on market decisions. Yet just a few weeks on the job, Kerviel unknowingly turned heads at the bank by winning big on a small, routine position. After terrorists struck London in July 2007, Kerviel decided to gamble against German insurer Allianz. He got the call right, and brought in a cool (and unexpected) €500,000. Kerviel’s supervisors gave the junior trader a rare pat on the back for his win – and, according to Kerviel, that praise would come to fuel his ambition.

Cheat big, win big
After his first big win, Kerviel started cheating almost immediately – and his experience on the bank’s middle desk taught him how to cover his tracks. First, he hacked into company computers to disarm the bank’s safeguards. Then, he started taking large, open positions betting against the market. To ensure he wasn’t caught, Kerviel had to offset his unauthorised positions by filing hundreds of thousands of small, fictitious hedge trades elsewhere. Bank Chairman Daniel Bouton retrospectively described Kerviel’s method as “a mutating virus” in which each trade existed for as little as just a few hours, before automatically closing and shifting into newly initiated positions. The money began to pour in almost immediately. In 2005, he raked in €4m for the bank. By the end of 2006, he was making €11m. From his present-day prison cell, Kerviel has told reporters how he fondly remembers his supervisors showboating him around the office, declaring him the company’s “cash machine”. Kerviel rarely got a call wrong, and was earning more than double his targets. Yet it was in 2007 that Société Générale’s human printing press really started earning his salt.

In 2005, Kerviel raked in €4m for Société Générale

It was July, and the financial crisis was only just beginning to upset markets. Most banks were trading on the assumption that things were going to get worse. Kerviel decided to break ranks and bet on a rebound. He piled up a €28bn exposure in just a few months – and, incredibly, got the call right. Kerviel was able to bring in an enormous €1.4bn profit, and “no one was complaining.” Yet hubris eventually smacked Kerviel in the face. At the start of 2008, markets were slumping more than ever. Most of the traders were making huge sell-offs, equity indices were dropping and banks were treading carefully. Kerviel, on the other hand, was confident things would turn around again. He built up a position of €50bn, more than Société Générale’s entire market capitalisation, betting that stocks would bounce back. This time, he got the call dead wrong.

Kerviel was sitting at his brother’s house in Paris eating breakfast when the pandemonium began to unfold. The equities rebound he had predicted never materialised – and by the time bank bosses realised what had happened, the damage had already been done. In just three days of trading, Société Générale tallied up losses at €4.9bn. The bank’s shares tumbled, an emergency rights issue ensued and the CEO swiftly resigned. Jérôme Kerviel’s wild ride had come to a screeching halt.

A march against tyranny
Despite their best efforts, police said they lacked enough evidence to charge Kerviel with fraud. Instead, the best they could do was to charge the trader with breach of trust and illegally accessing a computer. Société Générale filed a separate lawsuit against Kerviel for forgery, too. Yet two years passed before the rogue trader would ever go to trial. Finally, in June 2010, he appeared in court to make his case. Kerviel entered the dock with his head held high. He admitted to exceeding trading limits, faking documents and entering false data into computers. Yet his defence, such as it was, intrigued the public: he said his supervisors had known exactly what he was doing, and argued he was nothing more than a single cog in a monstrous, broken machine. An internal report from the bank backed up his claims, having found that Kerviel’s managers failed to follow up on 74 different alarms about the trader’s dubious trading activities.

In order to pay back Société Générale, Kerviel would have to hand over €100,000 every year for 49,000 years

The judges didn’t buy it. In October, Kerviel was handed a jail sentence of five years, with two suspended, and commanded to repay Société Générale the €4.9bn he lost them. It was the latter that moved quite a few people into Jérôme Kerviel’s corner. After all, in order to pay back the bank, the unemployed trader would have to hand over €100,000 – his top salary at Société Générale – every year for 49,000 years.

Bank officials weren’t immune from a wag of the finger, either. France’s top banking supervisor fined Société Générale €4m for its lax monitoring of staff, and went on to investigate several other back room traders. Later that year, the bank let go a handful of staff for minor fraudulent activity. Yet Kerviel’s defence lawyer, Olivier Metzner, unsurprisingly lambasted the sentence and promised that he would appeal. The trader’s sentence was deferred until then.

So, in October 2012, Kerviel was forced to enter the dock once again, but a Parisian court of appeals shocked the public by deciding to uphold his original 2010 sentence. Yet again, Mr Metzner scoffed at the decision, and decided to take Kerviel’s case all the way to the highest court in the land. But the trader didn’t stick around to hear their verdict. Unemployed and the subject of immense political debate, Kerviel understandably started flirting with depression. It was difficult to assess where to go; therefore, at the behest of a prominent French bishop, Kerviel decided to seek guidance from the most divine source he could think of: Pope Francis.

In February this year, Kerviel jetted off to Rome, where he met with the Pope outside the Vatican. The two are said to have spent much time discussing what the Catholic leader called “the tyranny of the markets”. Then, in order to give Kerviel a little otherworldly strength to face his earthly struggles, the Pope also offered Kerviel a blessed rosary. Despite the Pope’s good grace, Swedish Guard officials describe the conversation as little more than “a lapse in security”; however, the meeting caused serendipity to strike in the mind of Jérôme Kerviel. The best way to illustrate his transformation from capitalist pawn, he reckoned, was a public display of repentance.

Société Générale post-trading scandal


Operating income, 2006


Operating income, 2007


Net income, 2006


Net income, 2007

Facing the music
Following an old pilgrimage route from Rome to Paris, Kerviel decided to solemnly trudge 1,400km home in a self-righteous ‘march against the markets’. Surviving solely upon donations from well-wishers and good Samaritans, Kerviel slowly meandered his way back home, where he knew judgement would be awaiting him. He was followed every step of the way by a proverbial media circus. In March, while Kerviel was somewhere in Tuscany, his lawyer got in touch about the court’s most recent decision. It was more than he could have hoped for. Judges in Versailles ruled Kerviel would have to serve his jail time – but should not have to repay the €4.9bn he lost. Instead, a “more reasonable” figure would later be decided by a civil court. Members of Kerviel’s growing fan club were elated; however, the reformed trader was forced to pick up his walking pace, as judges gave him just two weeks to report himself to prison. Despite changing his mind several times, Kerviel eventually crossed into France just minutes before his legal deadline, and surrendered himself to local authorities.

It’s fairly safe to say Jérôme Kerviel’s odyssey is far from over – least of all because a civil court is still yet to reassess just how much the incarcerated trader should repay his former employer. Yet his reckless trading, jaw-dropping losses and quirky method of repentance have also brought trading activity under a new level of independent scrutiny.

The catastrophic tale of Jérôme Kerviel encouraged regulators to start cracking the whip on global institutions. In November 2012, USB was fined almost £30m for inadequate controls after city trader Kweku Adoboli cost the bank £2.3bn in losses. Last year, JPMorgan Chase was fined a combined $1bn from various authorities for the costly antics of Bruno Iksil, who became known as the ‘London Whale’. From his jail cell, Jérôme Kerviel has described how trading began to distort his sense of reality – forgetting he was playing with a tangible asset, rather than just inconsequential numbers on a computer screen.

If nothing else, one would hope that chilling realisation is proving to be a real eye-opener for the financial sector. With markets on the mend across Europe, it’s become vital, now more than ever, that regulators and boardrooms be proactive about getting their houses in order. After all, by turning a blind eye to questionable trading methods, it appears banks inevitably stand to lose more than they could ever hope to gain.