From CNBC: 2024-05-03 08:12:10

A former Societe Generale trader accused the French bank of making him a “scapegoat” for unauthorized risky trades that went unnoticed by the bank’s risk management system. The trader, Kavish Kataria, was fired last year, along with his team head, after being dismissed following an internal review of their transactions.

SocGen confirmed that the trades did not result in any losses, but could have potentially led to hundreds of millions of dollars in losses if there had been a market downturn. Kataria had been dealing in options on Indian indexes, which he was not authorized to do, and most of the trades were intraday, making them difficult to detect immediately.

Kataria claimed he made $50 million for the desk in the last eight months alone and called for better regulation in the trading industry after being dismissed without proper compensation. The incident highlights the importance of risk management in the banking sector, especially for a bank like SocGen, which was previously hit by a rogue trader scandal in 2008.

SocGen reported a lower-than-expected 22% drop in first-quarter net income, with profits on equity derivative sales partially offsetting weaknesses in its retail bank and fixed income trading. The incident serves as a reminder of the challenges banks face in maintaining control over trading activities to prevent significant financial losses.

Read more: SocGen trader fired for risky bets claims he was made a ‘scapegoat’