Societe Generale (SocGen) may have mislead investors about its exposure to the US subprime market and mislead investors about its established internal controls, which allowed a single trader to lose over $7 billion dollars.
This is a securities fraud class action lawsuit against Societe Generale (SocGen) alleging that SocGen violated the Securities Exchange Act of 1934 by misleading investors regarding its activities and exposure in the subprime mortgage markets, and its lack of sufficient internal controls and failure to act on information it had regarding the highly irregular and unauthorized trades by its Delta One derivative trading desk, handled by junior trader Jerome Kerviel.
The securities class action lawsuit also involves alleged insider trading by SocGen's top U.S. executive and board member, Robert A. Day.
Specifically, the class action complaint charges that during the Class Period SocGen:
(1) made false and misleading statements and concealed material adverse information regarding SocGen's exposure to subprime loans, collateralized debt obligations ("CDOs") and SocGen's internal controls;
(2) touted SocGen's conservative management, risk control, and expertise in risk analysis and structured finance, including CDO vehicles;
(3) misled investors by announcing that it had "very little exposure" to the subprime segment; and
(4) ignored or failed to act upon numerous alerts which should have led to the uncovering of Jerome Kerviel's massive irregular trading activity from 2005 through early 2008.
The class action complaint further alleges that the result of this fraudulent activity was that SocGen had to take write downs of close to $4 billion relating to the subprime market, and $7 billion in losses due to the highly risky and irregular trading by Kerviel, which caused a dramatic drop in share price and significant losses to investors.
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