SocGen on 48-hour dumping spree post-fraud: sources

By Sudip Kar-Gupta and William Kemble-Diaz

PARIS/LONDON (Reuters) - French bank Societe Generale (SocGen) conducted one of the most dramatic market sell-off operations in 48 hours after discovering an alleged fraud at the bank, traders and fund managers said on Friday.

They said the bank unwound more than a million Eurostoxx stock index futures contracts from January 21 to 22.

Estimates for the value of the contracts that SocGen dumped ranged from 20 billion euros ($29 billion) to 70 billion euros.

"What's emerging is that SocGen was brutal in the way it unwound its positions," said a trader at an investment bank.

The trader, like others sifting through the turmoil left by SocGen's losses, declined to be named because of the sensitivity of trading and banking relationships.

"It's possible they learned some lessons from what happened to Barings. It prevaricated as it negotiated with the Bank of England and positions moved further against it," he added.

The British bank toppled in 1995 after rogue trades carried out and concealed by Nick Leeson who fled and was later jailed.

The trader blamed for the SocGen scandal has not been seen since the losses became public but his lawyer says he is available to talk to French police and other investigators.

Colleagues named him as Jerome Kerviel.

On Thursday, SocGen disclosed the 4.9 billion euro ($7.2 billion) fraud debacle.

Kerviel used his inside knowledge of the bank's computer systems to cover up spiraling losses on his trading account, the bank said. That included using fake names and passwords.

He built up positions during 2007 but the global credit crunch, caused by losses in the U.S. mortgage sector, meant the market started to turn against him.

Traders and fund managers said that, upon learning of the fraud on January 19, SocGen decided abruptly to liquidate its positions into a falling market on January 21.

It is that decision which most baffles SocGen's competitors.

"People are trying to work out why they were in such a hurry to unwind, knowing that they were just digging a deeper hole," said a source close to a rival bank.