French Trader Gets 3 Years in Prison After $6.7B Loss

(Oct. 5) -- The young French stock trader whose risky, unauthorized deals lost his bank nearly $7 billion on the eve of the Great Recession will spend the next three years behind bars after being convicted of forgery and breach of trust.

A Paris court handed Jerome Kerviel a five-year prison sentence today, with the first two years suspended. He'll also have to repay a huge sum -- about $6.7 billion -- to his bank, Societe Generale, which was lost because of his risky trades. And he's barred for life from ever working again in the financial industry.

Kerviel, now 33, was found guilty of forgery, unauthorized computer use and breach of trust.

During his trial, the trader acknowledged breaking his bank's rules and hiding the size of his trades, but he defended his actions by claiming that Societe Generale knew about the dangerous bets he was taking but condoned them, as long as he was turning a profit.

"I'm someone who tried to do his job the best he could, in the interests of the bank," Kerviel said during his trial in June, according to The New York Times. "My objective was to help it make money."

At one point, Kerviel placed 50 billion euros (about $70 billion) of bets on stock market futures, which was more than the entire value of the bank at the time, MarketWatch reported.

"Kerviel knowingly went beyond his remit as a trader," presiding judge Dominique Pauthe told the court, according to the BBC.

Societe Generale had to reverse Kerviel's actions in a hurry, which resulted in huge losses for the bank and eventually its CEO's resignation, and ended up shaking stock markets just before the big slump of late 2008. The scandal broke records as the biggest-ever loss for any bank from unauthorized trading.

In January 2008, Kerviel's demise and Societe Generale's near-collapse because of him was an omen of what was to come months later when Lehman Brothers collapsed and wreaked havoc on the entire financial industry. Kerviel became a symbol of a culture of excess and risky behavior that many believe led to global financial ruin.

A spokeswoman for Societe Generale told the Times that the bank doesn't expect Kerviel to be able to pay back all of the bank's losses but considers the judge's order for him to do so "symbolic."

Kerviel's lawyer said he planned to appeal today's outcome. The judgment was "senseless" and the sentence was "extraordinary," Olivier Metzner told reporters, according to Reuters.