How Kervial did it

The question on everyone's mind is: how did he do it? Societe Generale believes that, Jerome Kervial placed large long bets in one portfolio and then created fake hedges in another portfolio. So instead of hedging, as he was supposed to do, Kervial was effectively speculating that various stocks and indexes were poised to rally. The New York Times notes that risk managers saw several red flags but were apparently satisfied with Kervial's explanations--that some trades were mistakes that he would then cancel. He apparently used access codes pilfered from others to help game the system. Kervial is in custody, and his lawyers are saying that the bank is using the incident to divert attention from its subprime-related woes.

For more:
- here's the New York Times article
- rogue trader in custody Article
- background on the rogue of SocGen Article