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A low-level trader caused the largest individual trading loss in banking history by simply using his knowledge of trading operations, some fake e-mail messages and, occasionally, colleagues' passwords to sidestep the bank's suspicion, according to media reports and a statement by French bank Société Générale.

Jérôme Kerviel, the 31-year-old man who has been nicknamed the "Mad Trader" by the French media, worked as part of Société Générale's Delta One team, an arbitrage trading group that made small profits by both selling and buying large financial positions in the European stock market. While large amounts of money are involved in the transactions, because the trades offset each other, there is typically little risk involved and a small profit for the trader, according to Société Générale's statement (pdf).

Starting in 2005, Kerviel began taking small positions on the trend in the European stock market without taking the countervailing position which would have offset the risk. The trader dodged financial controls by taking positions that did not trigger a margin call and which did not require immediate confirmation, the bank said in its statement. Since Kerviel bet on the European market's rise, the trader brought in significant profits until 2008, when the stock market began its decline.

When his activities arouse suspicions, Kerviel produced faked e-mails from the bank's clients to make it appear that the trades were legitimate, according to a New York Times article. Prosecutors in France continue to investigate Kerviel and could charge him with forgery, breach of trust and breaking into a computer system, the NY Times article stated. Kerviel did not steal from the bank itself, rather sought bigger profits so that his own bonus would be higher. Société Générale has called Kerviel a "computer genius."

The bank has come under increasingly criticism for its lack of awareness of Kerviel's activities.

The €4.9 billion (US$7.2 billion) loss caused by the the trader, and the bank's subsequent unwinding of the positions over three days, may have contributed to the decline in the European market on January 21 and 22, an event that preceded a three-quarter point cut in a key interest rate by the Federal Reserve, the United States' central bank. The value of the trading positions Kerviel placed totaled almost €50 billion ($75 billion), according to media reports.